##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K



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|                                            |  |                                                                                          
|------------------------------------------- |  | -----------------------------------------------------------------------------------------
|                                           
|                                           
|                                           
|                                           
|[X]                                         |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 1999
|OR                                         
|[  ]                                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
|                                            |  | For the transition period from
	            to                                           

Commission file number 000-22001

DELTEK SYSTEMS, INC.



|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Virginia                                                        |  | 54-1252625                           
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)
|                                                               
|                                                               
|                                                               
|                                                               
|                                                               
|8280 Greensboro Drive, McLean, Virginia                         |  | 22102                                
|(Address of principal executive offices)                        |  | (Zip Code)                           

Registrants telephone number, including area code: (703) 734-8606

Securities registered pursuant to Section 12(b) of the Act:

|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of each class           |  | Name of each exchange on which registered
|                              |  |                                          
|Common Stock, $.001 par value |  | Nasdaq National Market                   

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
 to such filing requirements for the past
90 days.  Yes  [X]     No  [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.  [X]

The aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 24, 2000, was
$92,736,051, based on a total of 5,982,971 shares held by
non-affiliates on that date and computed by reference to the
closing price reported on the Nasdaq National Market on that
date, which was $15.50 per share.

The Company had 16,717,840 shares of Common Stock, $.001 par
value, outstanding as of March 24, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information to be contained in the registrants
proxy statement for the 1999 annual meeting of the
registrants shareholders, which is to be filed pursuant to
Regulation 14A within 120 days after the end of the
fiscal year covered by this Form 10-K, is incorporated into
Part III of this report by reference to such proxy statement.









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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|ITEM 1. BUSINESS                                                                             
|ITEM 2. PROPERTIES                                                                           
|ITEM 3. LEGAL PROCEEDINGS                                                                    
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|ITEM 6. SELECTED FINANCIAL DATA                                                              
|ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                  
|ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|ITEM 11. EXECUTIVE COMPENSATION                                                              
|ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    



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TABLE OF CONTENTS

|                     |           |  |                                                                                        |  |  |    | 
|-------------------- | --------- |  | -------------------------------------------------------------------------------------- |  |  | -- | 
|PART I               |           |  |                                                                                        |  |  |   
|                    
|                    
|                    
|                    
|                     | Item  1.  |  | Business                                                                               |  |  | 3  | 
|                    
|                    
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|                    
|                     | Item  2.  |  | Properties                                                                             |  |  | 13 | 
|                    
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|                    
|                     | Item  3.  |  | Legal Proceedings                                                                      |  |  | 13 | 
|                    
|                    
|                    
|                    
|                     | Item  4.  |  | Submission of Matters to a Vote of Security Holders                                    |  |  | 13 | 
|                    
|PART II              |           |  |                                                                                        |  |  |   
|                    
|                    
|                    
|                    
|                     | Item  5.  |  | Market for Registrants Common Equity and Related
	Stockholder Matters                 |  |  | 13 | 
|                    
|                    
|                    
|                    
|                     | Item  6.  |  | Selected Financial Data                                                                |  |  | 14 | 
|                    
|                    
|                    
|                    
|                     | Item  7.  |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |  |  | 16 | 
|                    
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|                     | Item  7A. |  | Quantitative and Qualitative Disclosures About Market Risk                             |  |  | 28 | 
|                    
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|                     | Item  8.  |  | Financial Statements and Supplementary Data                                            |  |  | 28 | 
|                    
|                    
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|                     | Item  9.  |  | Changes in Disagreements on Accounting and Financial Disclosure                        |  |  | 28 | 
|                    
|PART III             |           |  |                                                                                        |  |  |   
|                    
|                    
|                    
|                    
|                     | Item  10. |  | Directors and Executive Officers of the Registrant                                     |  |  | 28 | 
|                    
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|                    
|                     | Item  11. |  | Executive Compensation                                                                 |  |  | 28 | 
|                    
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|                    
|                     | Item  12. |  | Security Ownership of Certain Beneficial Owners And Management                         |  |  | 28 | 
|                    
|                    
|                    
|                    
|                     | Item  13. |  | Certain Relationships and Related Transactions                                         |  |  | 28 | 
|                    
|PART IV              |           |  |                                                                                        |  |  |   
|                    
|                    
|                    
|                    
|                     | Item  14. |  | Exhibits, Financial Statement Schedules, and Reports On Form 8-K                       |  |  | 28 | 
|                    
|                    
|                    
|                    
|FINANCIAL STATEMENTS |           |  | F-1                                                                                    | 



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FORWARD-LOOKING STATEMENTS

In addition to historical information, this Annual Report
includes certain forward-looking statements. The
words anticipates, believes,
estimates, expects, plans,
intends and other similar expressions are intended to
 identify these forward-looking statements, but are not the
exclusive means of identifying them. Readers are cautioned not to
 place undue reliance on these forward-looking statements as
these forward-looking statements reflect the current view of the
Company or its management and are subject to certain risks,
uncertainties and contingencies which could cause the
Companys actual results, performance or achievements to
differ materially from those expressed in or implied by these
statements. These risks, uncertainties and contingencies include,
 but are not limited to, the factors discussed under the heading
Managements Discussion and Analysis of Financial
Condition and Results of Operations,
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Factors that May
Affect Future Results and Market Price and elsewhere in
this Annual Report. Deltek undertakes no obligation and does not
intend to update, revise or otherwise publicly release the result
 of any revisions to these forward-looking statements that may be
 made to reflect future events or circumstances.

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PART I






|        |         
|------- | --------
|ITEM 1. | BUSINESS

Deltek Systems, Inc. (Deltek or the
Company) is a leading provider of enterprise software
 products that enable project-oriented professional service firms
 to more effectively manage, operate and grow their operations.
Our software products address the needs specific to such
organizations through a wide range of functionality, such as
financial and project accounting, human resources management and
administration, materials management and project reporting. We
also provide a full range of services, including implementation
and consulting, training and ongoing support. In the year ended
December 31, 1999, 30% of our total revenues were derived
from software license fees and 67% of our total revenues were
generated from services. Since our inception, we have licensed
our products to over 5,000 project-oriented organizations across
a spectrum of industries, including IT services and consulting,
architecture and engineering, environmental, systems integration,
 research and development, contract services and construction, as
 well as make-to-order manufacturers and not-for-profit
organizations. Many of these project-oriented organizations
provide products and services under federal government contracts.

From 1995 through 1999, total revenues increased from
$34.3 million to $98.2 million, representing compound
annual growth of 30.5%, and income from operations, exclusive of
non-recurring charges, increased from $9.8 million to
$26.9 million, representing compound annual growth of 29.3%.
 For the year ended December 31, 1999, total revenues
increased 18.3% from the comparable prior year period to
$98.2 million, and income from operations, excluding
non-recurring charges, increased 19.9% from the comparable prior
year period to $26.9 million.

Industry Background

Increasing competition has created pressure for organizations to
better utilize information technologies to manage their
businesses, improve efficiency, reduce costs and provide
employees and management with more timely and pertinent
information. Information technology is now viewed as a strategic
and tactical tool, as well as a means of facilitating information
 processing and reducing costs. As a result, many organizations
are implementing enterprise-wide business systems to automate
their operations, including finance, accounting, manufacturing,
human resources, reporting and customer management functions. In
addition, organizations are recognizing the need to deploy
front-office solutions as a means of better managing customer
relationships to ensure survivability as competitive pressures
increase.

Most enterprise-wide business systems are general purpose in
design and, without significant customization, do not address
many of the unique requirements of businesses engaged primarily
in providing products and services under project-specific
contracts and engagements. Project oriented organizations have
many project-specific requirements. Such requirements include the
 need to track costs and profitability on a project-by-project
basis, provide timely project information to managers and
customers and submit accurate and detailed bills, often in
compliance with complex industry-specific and regulatory
requirements. Many project-oriented organizations provide
products and services under government contracts. Project
accounting for these organizations often requires the use of
sophisticated methodologies for allocating and computing project
costs and revenues.

The use of project-oriented and professional service business
application software systems is expanding as a result of a number
 of economic trends. Service organizations traditionally have
utilized project accounting more than manufacturing firms due to
the need to customize their services for each client and to
properly allocate the associated revenues and costs. Therefore,
as the shift from a manufacturing-based economy to a
service-based economy continues, the market for project-oriented
organizations is expanding. Furthermore, the trend towards
outsourcing an increasing range of activities broadens the market
 for project-oriented organizations as both customers and vendors
 need to track the costs associated with their projects. Finally,
 many organizations with significant internal development
activities can benefit from the use of project accounting systems
 to closely monitor their progress and cost.

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As the number and type of project-oriented organizations
increase, such businesses are demanding increasingly
sophisticated tools to address their core information and
accounting needs, including project accounting, employee time
collection, project budgeting, project reporting and customer
management. At the same time, these organizations are recognizing
 that, because most aspects of their businesses revolve around
their project orientation, they can achieve efficiencies in a
number of other accounting and business functions, such as
general ledger, accounts payable, accounts receivable, materials
management and human resources, through the use of software
applications designed to address the special needs of
project-oriented organizations. Like other businesses,
project-oriented organizations are also demanding solutions that
allow them to combine their business software applications into a
 single integrated, enterprise-wide system.

The Deltek Solution

Deltek is a leading provider of enterprise software products that
 enable project-oriented and professional service firms to more
effectively manage, operate and grow their operations. Our
software products address the needs specific to such
organizations through a wide range of functionality, such as
financial and project accounting, human resources management and
administration, materials management and project reporting. We
also provide a full range of services, including implementation
and consulting, training and ongoing support.

Since our inception, we have focused exclusively on developing
and providing products and services designed to meet the needs of
 project-oriented organizations. We believe that this focus is a
competitive advantage in serving project-oriented markets
relative to companies that offer more general-purpose enterprise
software. We believe that our solutions generally are better
suited, require shorter implementation times and cost less to
install and maintain than general-purpose enterprise solutions.
The primary software product suites that we currently market
consist of Project Workplace, a web-enabled, front-office
and customer relationship management solution for project-based
environments; Costpoint®, an advanced client/ server-based
business software system designed for all types of complex
project-oriented organizations; Advantage, an integrated,
project-focused accounting system designed for professional
services firms; GCS Premier, project accounting software
for small-to mid-sized organizations providing products or
services under contracts with the federal government; and ET
Enterprise, an advanced employee timekeeping system.

We also provide implementation and consulting, training and
ongoing support services as an integral part of our solution. In
contrast to general-purpose software vendors that often rely on
third-party providers, we have a staff of over 178 experienced
system consultants who directly assist our customers with system
implementation. Beyond implementation, we provide training either
 on site or at one of our four training centers. We also provide
to our customers ongoing product maintenance and technical
support, which is a significant source of recurring revenues.

Strategy

Our objective is to strengthen our position as a leading provider
 of enterprise software products to project-oriented
organizations and to become a recognized leading provider of
professional services automation solutions by pursuing a strategy
 that includes the following elements:

Maintain Focus on Project-Oriented Markets.Since our
inception, we have focused on addressing the unique business
needs of project-oriented organizations. We believe that our
exclusive focus on developing applications for project-oriented
organizations is a competitive advantage in serving these markets
 relative to companies that offer more general-purpose enterprise
 software. We believe that our solutions generally are better
suited for project-oriented organizations, require shorter
implementation times and cost less to install and maintain than
general-purpose enterprise solutions. We intend to capitalize on
the expertise that we have developed by continuing to market to
project-oriented organizations, including those operating under
federal government contracts, architecture and engineering firms
and other professional and technical organizations.

Deliver End-to-End Professional Services Automation. In
recent months, industry analysts have focused on the strengths
and merits of applications called professional services
automation (PSA). PSA applications include our current
front-office solutions in Project Workplace and ET Enterprise as
well as some of the

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Expand Comprehensive, Technologically Advanced Product Line. We have developed a family of complementary products with
broad-based functionality, usable in a variety of technology
environments, which we offer to project-oriented organizations.
We intend to continue to expand the breadth of our product
offerings and to enhance the features and functionality of each
of our currently marketed applications. Our primary development
initiatives include the completion of additional modules and
e-business capabilities within our Project Workplace front-office
 CRM product suite, final completion of remaining GCS Premier
modules, and a new software application for planning and
budgeting. The primary focus with these additional modules and
capabilities will be to enable a better end-to-end solution for
the delivery of PSA. In addition, the Company has identified the
market need to add a web interface to its back-office accounting
products, Costpoint, Advantage and GCS Premier. While web-based
reporting tools were added over the past year, there is still a
need to provide core functionality through a standard web browser
 interface. Development of completely new, web-based versions of
the back office products may take several years.

Deliver e-Business Solutions for Project Businesses.A key
 aspect of our strategy is to provide solutions that enable our
customers to do e-project business. To accomplish
this, we have recently introduced a web-based, add-on product to
Project Workplace called MyProjectWorkplace.com. This new product
 will provide e-business software to our customers to enable them
 to set up project websites for their own customers that allow
their customers to keep up to date on real-time project
activities and financial data and to collaborate on project
issues. By integrating these e-business components into our
software, we will provide our customers with solutions that can
be more easily implemented and maintained.

Expand Services Offerings.An integral part of our
solution is to provide superior services, including
implementation and consulting, training and ongoing support,
directly to our customers. Services represented 67% of our total
revenues for the year ended December 31, 1999. We believe
that our reputation for providing high quality services and our
approach of working directly with customers are significant
competitive advantages that result in a high level of customer
loyalty. Almost all of these current services are provided in
conjunction with or relation to the implementation of our
software products. To broaden our services offerings with a more
proactive role in the business success of our customers, we
intend to provide additional consulting and training services to
our customers related to areas such as human resource management,
 business intelligence, IT consulting and solutions, and
government contract consulting that are not necessarily related
to our software products.

Leverage Large Installed Customer Base.Our large
installed customer base enables us to generate revenues from
ongoing services and product enhancements provided to these
customers. Our strategy is to (i) maintain and strengthen
relationships with our existing customers by providing ongoing
support services; and (ii) derive additional revenues by
migrating clients to more advanced products within our product
line, licensing add-on application software products and offering
 our customers additional consulting and training services. An
important element of our strategy is to license our Project
Workplace, ET Enterprise, Costpoint, Advantage and GCS Premier
products to existing users as these customers migrate to
client/server environments or otherwise update their technology
systems.

Products

Our currently marketed software product suite consists of Project
 Workplace, Costpoint, Advantage, GCS Premier, and ET Enterprise.
 These products are generally marketed together with industry
standard business intelligence tools and database software.

Project Workplace. Project Workplace is a suite of
web-enabled, employee-facing applications designed to address
critical customer relationship management, project management,
and resource management functions in a project-based,
professional services organization. It integrates a number of
applications including opportunity management, project
administration, recruiting and project financials. The
applications are designed to promote teamwork and create a common
 synergy and to drive the focus of an entire

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Project Workplace consists of the following applications:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Project CRM:This core application provides a wide array
	of customer relationship management (CRM), lead tracking,
	opportunity management, and resource management capabilities
	specially designed for project-based, professional services
	organizations. The application organizes key project information
	across the business by customer, employee assignment, project
	communications, and other categories, and allows team members to
	view project information when and how they need it. Using this
	application, project managers, salespeople, and marketing
	professionals will have the tools they need to have a higher
	awareness of the customer, to allow for better communication
	across teams, and identify and win new and add-on
	project opportunities. It also features threaded collaboration to
	 help identify customer and project issues, develop action plans,
	 and reach resolutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Project Financials:Integrates with back office financial
	systems to provide key financial information to project managers,
	 and empowers project managers with high-level accounting and
	financial information. This module is currently in beta release.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Team Recruiting:Streamlines the recruiting process by
	providing a quick path for recruiting, hiring, and retaining the
	right personnel for project needs. The centralized database
	enables project managers, business development managers, proposal
	 personnel, and human resources staff to access and track both
	internal and external applicants along with their skills,
	education, and experience. This module is currently in beta
	release.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | MyProjectWorkplace.com: MyProjectWorkplace.com is an
	 Internet-based solution designed to help professional services
	firms strengthen their customer relationships through better
	project communication and teamwork and to enable e-project
	business. MyProjectWorkplace.com enables our customers to
	establish unique, project-focused web sites for their customers
	and partners to enhance client satisfaction and project success.
	Project businesses that deploy this product will enable their
	customers to have full-time, web access to review and analyze
	project status, profiles, calendars, events, milestones, project
	documents, billings and financial performance. It also includes
	complete project collaboration features allowing project
	customers to post and review issues, questions and answers
	relating to the project. Information can also be made available
	on each member of the project resource team, including billable
	hours-to-date and profiles of each staff members skills,
	experience and qualifications. In addition, this application
	provides features to establish and track project success factors
	and to insure the visibility of these success factors and
	performance against the established evaluation criteria.
	MyProjectWorkplace.com will be released in beta during the second
	 quarter of 2000.

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The following table lists the principal Project Workplace
applications and features:

|                       |  |                                                                                                                                                                      |  |                                                                                                                                                                                                   
|---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                     
|Application            |  | Features                                                                                                                                                            
|Project CRM            |  | Customer Data
	Contact Profiles
	Opportunity Management
	Key Factors
	Project Profiles
	Project Activities
	Threaded Collaboration
	Project Workforce
	Lead Tracking |  | Access to Project Info.
	Document Management
	Search Capabilities
	Project Communication
	Track Project Milestones
	Key Success Factors
	User-Defined Views
	Document Merge
	Client Communications
|Project Financials     |  | Back Office Appl. Interface
	Multiple Views of Data
	Analysis                                                                                                        |  | Project Data Access
	Budget Performance                                                                                                                                                           
|Team Recruiting        |  | Applicant Database
	Communication Tool
	Applicant Tracking
	Qualifications Database                                                                                  |  | Recruitment Proc. Tracking
	Search Capabilities
	Back Office Financial Integration
	Team Collaboration                                                                                            
|MyProjectworkplace.com |  | Web-Based Project Portal
	Project Calendar and Schedule
	Resource Data                                                                                               |  | Customer Communication
	Financial and Data
	Threaded Collaboration                                                                                                                                

Costpoint®. Costpoint is an advanced
client/server-based, enterprise-wide business software system,
consisting of over 25 integrated module applications encompassing
 the following areas:



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | Financial Accounting 
	 Project Accounting 
	 Materials Management 
	 Human Resource and Payroll   Administration

In addition to financial accounting, Costpoint is designed to
meet the specialized needs of project-oriented businesses,
including:



| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | Project Costing 
	 Indirect Cost Allocation 
	 Revenue Recognition 
	 Project Budgeting 
	 Project Reporting

Costpoint also meets the common regulatory and reporting
requirements of businesses with federal government contracts.
Costpoint combines these capabilities with applications in other
business system areas that are designed for the special needs of
project-oriented organizations. Through its open data
architecture and the use of drill-down inquiries, on-line
analytical processing (OLAP) tools and standard
reports, Costpoint provides managers with timely and pertinent
information.

Costpoint utilizes an open, relational database architecture on
the server and Microsoft Windows operating systems on the desktop
 client PC. It can be operated on a variety of network operating
systems, including Windows NT, UNIX and Novell Netware and
currently supports Oracle Systems Corporation
(Oracle), Microsoft SQLServer, Sybase Inc.
(Sybase) and Centura Corporation
(Centura) relational databases. Costpoint employs
32-bit technology and was developed with extensive use of
object-oriented programming techniques utilizing a fourth
generation language together with C++ and database-specific
stored procedures to maximize performance. As a result of this
architecture, Costpoint is scaleable and can be utilized in
organizations with three to 300 concurrent users.

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We began development of Costpoint in 1992 and commercially
released the product in June 1995. Through December 31,
 1999, we had licensed approximately 718 Costpoint systems.
License fees for Costpoint systems vary depending on the number
of users and sites and the number and types of modules licensed.

The following table lists the principal Costpoint application
areas and modules:

|                                   |  |                                                                                                       |  |                                                                                                    
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------
|                                   |  |                                                                                                      
|Application areas                  |  | Modules                                                                                              
|Financial Accounting               |  | General Ledger
	Accounts Payable
	Accounts Receivable
	Consolidations                                 |  | Travel
	Fixed Assets
	Workflow
	Multicurrency                                                      
|Project Accounting                 |  | Project Setup
	Project Reporting
	Project Budgeting                                                   |  | Project Billing
	Project Cost and Revenue Processing
	Project Management Interfaces                
|Human Resources and Administration |  | Labor
	Payroll
	Human Resources                                                                       |  | Benefit Tracking
	Labor/ Payroll Interfaces                                                        
|Materials Management               |  | Product Definition
	Purchasing
	Procurement Planning
	Inventory
	Bills of Material
	Sales Order Entry |  | Receiving
	Routings
	Engineering Change Notices
	Material Requirements Planning
	Production Control

Advantage.Advantage, an integrated, project-focused
accounting system for professional services firms, was designed
and developed by Harper and Shuman, which we acquired in
May 1998. The Advantage product currently includes the
comprehensive modules:



| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Project Control 
	 Accounting 
	 Billing 
	 Accounts Payable 
	 Payroll 
	 Profit Center Reporting 
	 Timekeeper 
	 Multi-User 
	 Expensekeeper

Advantage employs 32-bit technology, provides a superior user
interface utilizing current Microsoft Windows platforms, and
utilizes either Microsoft SQLServer or Access database platforms.
 Advantage can operate on a stand-alone PC or within a local or
wide area network environment.

Advantage has fewer modules, is generally less complex and easier
 to implement and results in a lower cost of ownership than
Costpoint. Accordingly, the Company markets Advantage primarily
to small and mid-sized professional services firms with
relatively less complex requirements.

We began development of Advantage in 1995 in response to the
technical maturation of the CFMS product line. Advantage was
commercially released in December 1996. Through
December 31, 1999, it had been licensed to approximately
2,551 organizations, primarily architecture and engineering
firms. License fees for Advantage systems vary depending on the
number of the customers employees and sites and the number
and types of modules licensed.

GCS Premier. GCS Premier is Delteks new,
Windows-based enterprise accounting solution for small to
mid-sized businesses that earn revenue from government contracts.
 The product was released in Beta form to select customers in
August 1999. General release occurred in March 2000. In
 addition to its Windows-based interface, it features flexible,
state-of-the-art component based software construction achieved
with MS Visual Basic 6.0 and ActiveX controls. GCS Premier was
designed specifically to ensure that our System1 customers could
easily migrate to GCS without the necessity of data conversion
while preserving System1s

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ET Enterprise. ET Enterprise is a highly scaleable,
comprehensive timesheet software application that allows
employees to enter their timesheets on a daily basis on their
desktop PC. ET Enterprise utilizes either Windows or web-based
browser on the desktop PC and provides a graphical, point and
click interface. ET Enterprise enables employees to select from a
 list of authorized charges rather than having to enter
complicated account and project numbers. This feature serves to
reduce costly and time-consuming errors. After the employee
electronically signs his or her timesheet, the timesheet is then
forwarded through the network for manager approval. Timesheets
and the appropriate labor charges can then be automatically
accumulated and integrated with the accounting system, completely
 eliminating the paper timesheet. ET Enterprise allows managers
to view information about employees activities and helps
them to better manage their employees. It operates on various
relational database management systems platforms, such as Oracle,
 Microsoft, SQL Server, and Centura SQL base database systems.

The majority of our ET Enterprise licensees are also licensees of
 Costpoint, System1, or Advantage, although the product is also
sold on a stand-alone basis to users of other accounting systems.
 It interfaces with all Deltek products as well as enterprise
applications from Oracle, Peoplesoft, JD Edwards, ADP, Pay
America, and others.

As of December 31, 1999, ET Enterprise and its predecessor
product, Electronic Timesheet, had been licensed to a total of
approximately 475 customers representing over 150,000 end users,
many of whom use the product through a web browser. License fees
for ET Enterprise vary depending on the number of employees.

Recently, we have teamed with Call Technologies, Inc. to develop
a telephony interface to ET Enterprise. This interface will allow
 any user with access to a home, business, pay or cellular phone
to enter a timesheet. This Interactive Voice Response
(IVR) add-on product to ET Enterprise is now in beta
release.

Other Legacy Software Products. In addition to the above
products currently marketed, we also maintain and support two
legacy product lines that we no longer market. These include
System1 and CFMS. System1 was our original accounting system for
government contractors. We estimate that approximately 2,000
companies have licensed System1 since it was commercially
released in 1985. As of December 31, 1999, approximately
1,127 licensees were continuing to pay for ongoing support
services related to System1. Since our introduction of our more
advanced Costpoint system, the majority of our new customers have
 licensed Costpoint systems, and new System1 sales have decreased
 in number and system size. Our strategy is to migrate as many of
 these System1 users to our newly introduced GCS Premier product,
 which delivers similar functionality with modern technology and
updated feature sets. We presently provide significant discounts
to customers migrating from System1 to GCS Premier.

The CFMS product line includes three older-generation accounting
systems designed and developed for architecture and engineering
firms by Harper and Shuman. Through December 31, 1999, CFMS
systems have been licensed to over 2,700 organizations. We intend
 to seek migration of CFMS users to Advantage or Costpoint. To
date, 1,500 CFMS users have migrated to the Advantage product.

We plan to continue to offer maintenance updates and telephone
support services to System1 and CFMS/ RD users for the
foreseeable future but do not plan to make significant software
enhancements to these products.

Third-Party Products.We incorporate into our software
products certain application software licensed from third
parties. The Business Intelligence Tools, Impromptu and Power
Play, are both licensed from Cognos Corporation, and the System1
report-writer, Intelligent Query, is also licensed from a third
party. These Business Intelligence Tools are an enterprise
solution for database query and reporting on the desktop and over
 the web. The tools enable the user to quickly and easily create
any query and report, while providing administrators with
flexibility, scheduling and distribution capabilities. In order
to support Oracle, Sybase and Centura relational databases,
Costpoint contains certain native router software
licensed from Centura. In

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Customer Service and Support

An integral part of our solution is to provide superior services
and support directly to our customers. These services include
comprehensive implementation and consulting, training and ongoing
 support. We believe that our reputation for providing high
quality services and our ability to work directly with our
customers, rather than through third-party resellers and system
implementers, are significant competitive advantages.

Implementation and Consulting Services.We typically
provide a full range of consulting and technical services to
customers both during and after implementation of Deltek
software. Our system consultants are involved in the important
early planning and design stages of an implementation,
participate in user training, and work closely with the customer
during the two- to 12-month period just before and after the
going live date. After the implementation is
completed, our consultants typically maintain an ongoing
relationship with the customer and assist the customer in
refining their systems and adding functionality as their business
 grows and requirements change. Our implementation and consulting
 services are generally charged on a time and materials basis.

Ongoing Support Services. We provide comprehensive
telephone support during business hours as well as supplemental
emergency support after hours and on weekends. We utilize a
sophisticated in-house support tracking system that enables call,
 problem and resolution tracking. We also maintain an open
phone policy whereby customers are encouraged to contact
any supervisor or senior manager at Deltek for any reason. We
typically handle between 450 and 650 support calls per day. We
provide periodic updates and enhancements to each of our software
 products. Typically, we provide several minor updates per year,
which include system error corrections, tax table updates and
other minor enhancements, and new version releases periodically,
which include major enhancements and changes to the database
design. Telephone support and periodic product enhancements and
updates are provided for fees that are payable quarterly and
initially represent, on an annual basis, between 15% and 20% of
the related software license fee.

Training Services.Our training facilities are located at
our McLean, Virginia headquarters and at our offices in San Jose,
 California, St. Louis, Missouri and Cambridge, Massachusetts,
where we provide regularly scheduled training classes on
approximately 40 topics related to our products. We maintain
system laboratories at our training facilities, which are
available for customer testing, benchmarking and troubleshooting.
 We also offer custom, on-site training classes. Training is
billed hourly or on a per class basis.

Customers

Since inception, we have licensed our products to over 5,000
project-oriented organizations, predominantly in the United
States, across a spectrum of industries. Project-oriented
industries that we currently serve include IT services and
consulting, architectural, engineering, environmental, systems
integration, research and development, contract services and
construction, as well as make-to-order manufacturers and
not-for-profit organizations. Many project-oriented businesses
within these industries provide products and services under
government contracts. No customer accounted for more than 10% of
the Companys total revenues in 1997, 1998 or 1999.

Sales and Marketing

We sell our products and services primarily through our direct
sales force. As of December 31, 1999, we had 36 full-time
sales personnel and 16 full-time marketing personnel at our
offices in McLean, Virginia, St. Louis, Missouri, Cambridge,
Massachusetts and San Jose, California. In January 1999 we
established a sales and marketing office in London, England.

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Our sales cycle begins with the generation of a sales lead or the
 receipt of a request for proposal. Sales leads are generated by
direct mailing to potential customers in selected markets, as
well as through advertising, seminars and trade shows. Our sales
personnel work closely with prospective customers to understand
their reasons for undertaking a system change and to identify
their specific business and system requirements. Increasingly, we
 target project managers in addition to accounting managers. When
 the prospective customer is ready for a product demonstration,
we utilize specially trained and industry-experienced
professionals to provide the product presentation. We provide
prospective customers with information to explain the
capabilities and benefits of our products and to assist in
planning for the system implementation. The licensing and
implementation of our business software products is often a
decision with significant enterprise-wide implications involving
a substantial commitment of the customers management
attention and resources. The period between initial customer
contact and the customers purchase commitment typically
ranges from three to 18 months. Accordingly, our sales
process is subject to delays associated with a lengthy evaluation
 and approval process, including delays over which we have little
 or no control.

Our strategy is to expand our sales and marketing activities by
targeting organizations in additional project-oriented and
professional services industries, in both domestic and
international markets. Additionally, a significant source of
business for us is migrating existing customers to other systems.
 In support of our marketing efforts for existing customers, we
conduct ongoing customer communications programs and an annual
user conference.

Product Development

Our product development is generally organized into teams of six
to 12 developers who handle a particular product area, a group of
 programs or functions, or a new development area. Each
development team includes one or more subject matter experts who
are instrumental in the design of each new module and capability.
 Following the completion of high-level design, the development
team receives assistance from our database design team, which
helps with the important step of designing, or making changes to
the relational database architecture. Throughout the development
process, and particularly when the initial programming has been
completed, quality assurance team members provide testing and
analysis to ensure that the application has been developed using
standards and functions appropriate to its design and purpose.
Our product architecture group supports many of our product
development groups and focuses on development, enhancement and
maintenance of the object-oriented product development tools used
 throughout the development process. We utilize a sophisticated
in-house system for tracking the development process, program
check-in and check-out, version control and system error and bug
tracking.

A significant portion of the development related to the Costpoint
 product line is conducted using two fourth-generation
client/server development tools, SQLWindows and Team Developer,
which we license from Centura. In order to optimize performance
for process-intensive functions in Costpoint, such as project
costing and billing applications, we make extensive use of
database-specific stored procedures which enable specific
applications to operate much faster with considerably less
network traffic. C and C++ programming is also used throughout
Costpoint in various situations to improve performance and
functionality. Microsoft Visual Basic 5.0 as the primary
development tool for many of our new software products, including
 Project Workplace. Using the above development tools, we have
developed a number of reusable objects and classes to better
facilitate development.

Our primary development initiatives include the completion of
additional modules and e-business capabilities within our Project
 Workplace, front-office CRM product suite, final completion of
remaining GCS Premier modules, and a new software application for
 planning and budgeting. The primary focus with these additional
modules and capabilities will be to enable a better end-to-end
solution for the delivery of PSA. In addition, the Company has
identified the market need to add a web interface to its
back-office accounting products, Costpoint, Advantage and GCS
Premier. While web-based Business Intelligence reporting tools
were added over the past year, there is still a need to provide
core functionality through a standard web browser interface.
Development of completely new, web-based versions of the back
office products may take several years.

11



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In addition to the above development efforts, our product
development groups are continually focused on enhancements and
customary error corrections to existing versions, and development
 of future versions of Project Workplace, Costpoint, Advantage,
ET Enterprise and GCS Premier.

Our software development expenses, exclusive of certain
development costs which have been capitalized, were
$11.2 million, $15.0 million and $16.7 million in 1997,
 1998 and 1999, respectively. As of December 31, 1999, we
had 247 employees engaged in product development and quality
assurance activities, including 21 employees at our development
office in Manila, the Philippines.

Competition

The market for client/server-based business and web-based
application software is highly competitive and rapidly changing.
Our products are targeted toward a wide range of project-oriented
 organizations, and the competition that we encounter varies
depending upon the customers size, industry and specific
system requirements. For larger implementations of our
enterprise-wide products, our principal competitors include
Oracle, PeopleSoft, Inc., J.D. Edwards, and SAP AG. For
smaller implementations of our enterprise-wide products, our
competitors include Great Plains Software, Inc., Maxwell Business
 Systems, Inc., Platinum Software Corporation, Solomon Software,
State of the Art, Inc., Timberline Software Corporation, and
Semaphore Corporation, some of which offer industry-specific
products. ET Enterprise competes with electronic timekeeping
systems offered by vendors including Executive Partners Software,
 Automatic Data Processing, Inc. and Oracle. Our front-office
applications face competition from well-known companies such as
Siebel Systems, Inc. and Goldmine Software Corporation. We also
face indirect competition from the internal MIS departments of
our potential customers.

We believe that competition in the rapidly evolving markets for
business application software is based primarily on product
features and functions, product architecture, ease of
implementation, vendor and product name recognition and
reputation, customer service and support, and price. We believe
that we have competed effectively to date by developing products
and services that meet the unique needs of project-oriented
organizations. We also believe that our reputation for high
quality service and support, its ability to work directly with
its customers and its ability to provide rapid implementations
have constituted competitive advantages.

The front-office systems market faces competition from
customers internal information technology departments,
systems integrators, as well as from other application software
providers that offer a variety of products and services to
address this market. Many of our customers and potential
customers have attempted to develop front office systems
in-house, either alone or with the help of systems integrators.
We may not be able to compete successfully in this market.

Many of our competitors have significantly greater financial,
technical, marketing and other resources than Deltek. As our
larger competitors, such as Oracle and Peoplesoft, begin to
experience a deceleration in their core business and refocus
their marketing and sales efforts to the middle market in which
we actively market our products, we expect such competitors to
implement increasingly aggressive pricing programs. In addition,
certain competitors, particularly Oracle, PeopleSoft, and Siebel,
 have well-established relationships with many of our current and
 prospective customers and with major accounting and consulting
firms that may have an incentive to recommend such competitors
over us. Moreover, as we attempt to penetrate other strategic
vertical and PSA markets, we will likely encounter competitors
with substantially more experience in those markets.

Employees

As of December 31, 1999, we had 654 full-time employees,
including 247 employees primarily engaged in product development
and quality assurance, 130 in customer support and training
activities, 178 in consulting, 61 in sales and marketing, and 38
in finance and administration. None of our employees is
represented by a labor union or is subject to a collective
bargaining agreement.

12



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|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

Our corporate headquarters, our principal administrative, product
 development, sales and marketing operations and our principal
customer training center are located in 85,000 square feet of
office space in a building in McLean, Virginia, which we occupy
under leases expiring in March 2002, subject to our right to
 extend the lease term by one or three years. We also lease
approximately 4,124 square feet in Denver, Colorado, under a
lease expiring on January 31, 2001, which has been subleased
 to a third party, and 4,855 square feet in San Jose, California,
 under a lease expiring in January 2002. We lease
approximately 20,134 square feet in Cambridge, Massachusetts
under leases expiring in 2002, and 5,162 square feet in St.
Louis, Missouri under a lease expiring in 2003. We believe that
our existing facilities and offices are adequate to meet our
current needs and that, should it be needed, suitable additional
or alternative space will be available in the future on
commercially reasonable terms. See Notes to Consolidated
Financial Statements for information regarding our obligations
under facilities leases.






|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

We are not a party to any material pending legal proceedings,
other than ordinary and routine litigation incidental to our
business.






|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our shareholders during the
fourth quarter of the fiscal year covered by this report.

PART II






|        |                                                                              
|------- | -----------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS

Since February 25, 1997, the Companys Common Stock has
 been traded on the Nasdaq National Market under the symbol
DLTK. The high and low per share sales prices for the
 Companys Common Stock for each period indicated, as
reported on the Nasdaq National Market, are as follows:

|                             |                |       |   |       |  |  |   |       | 
|---------------------------- | -------------- | ----- | - | ----- |  |  | - | ----- | 
|                             |                |      
|                             |                | Price
|                             |                |      
|                             |                | High  |   | Low  
|                             |                |       |   |      
|Year Ended December 31, 1998 |                |       |   |       |  |  |   |      
|                            
|                            
|                            
|                            
|                             | First Quarter  |       | $ | 21.13 |  |  | $ | 15.75 | 
|                            
|                            
|                            
|                            
|                             | Second Quarter |       |   | 25.25 |  |  |   | 16.50 | 
|                            
|                            
|                            
|                            
|                             | Third Quarter  |       |   | 24.50 |  |  |   | 16.50 | 
|                            
|                            
|                            
|                            
|                             | Fourth Quarter |       |   | 19.13 |  |  |   | 13.50 | 
|                            
|Year Ended December 31, 1999 |                |       |   |       |  |  |   |      
|                            
|                            
|                            
|                            
|                             | First Quarter  |       | $ | 19.13 |  |  | $ | 8.25  | 
|                            
|                            
|                            
|                            
|                             | Second Quarter |       |   | 11.00 |  |  |   | 8.06  | 
|                            
|                            
|                            
|                            
|                             | Third Quarter  |       |   | 17.13 |  |  |   | 9.13  | 
|                            
|                            
|                            
|                            
|                             | Fourth Quarter |       |   | 17.88 |  |  |   | 9.69  | 

On March 24, 2000, the closing price for our Common Stock
was $15.50 per share and we had approximately 72 shareholders of
record. Management believes there are approximately 2,700
beneficial holders of our Common Stock and has been advised that
there are 121 individual participants holding approximately 51%
of the outstanding Common Stock pursuant to security position
listings furnished by Cede & Co., New York, New York,
registered clearing agency and depository.

As a former S Corporation, we made cash distributions to our
 shareholders, including in connection with the termination of
the Companys S Corporation status in
February 1997. In 1997, 1998 and 1999, we paid

13



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##### Table of Contents










|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

The following selected financial data should be read in
conjunction with the consolidated financial statements and the
notes thereto included elsewhere herein or incorporated herein by
 reference. The statement of operations data set forth below with
 respect to the years ended December 31, 1997, 1998 and 1999
 and the balance sheet data as of December 31, 1998 and 1999
 are derived from, and are qualified by reference to, the audited
 financial statements of the Company included elsewhere in this
Annual Report. The statement of operations data set forth below
with respect to the years ended December 31, 1995 and the
balance sheet data as of December 31, 1995 are derived from
unaudited financial statements not included in this Annual
Report. All amounts for all periods have been restated to reflect
 the acquisition of Harper and Shuman in May 1998, which was
 accounted for using the pooling-of-interests method of
accounting. The unaudited pro forma statement of operations data
set forth below do not purport to be indicative of the results of
 operations that would have occurred had the termination of the
Companys S Corporation status occurred at
December 31, 1994.

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|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        | 
|------------------------------------------------------ | --------------------------------------------- | ------------------------ | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                       |                                               |                         
|                                                       |                                               | Year Ended December 31, 
|                                                       |                                               |                         
|                                                       |                                               | 1995                     |        | 1996   |        | 1997 |        | 1998   |        | 1999
|                                                       |                                               |                          |        |        |        |      |        |        |        |     
|Statement of Operations Data:                          |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|Revenues:                                              |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | License fees                                  |                          | $      | 11,656 |        |      | $      | 14,114 |        |      | $      | 21,043 |        |   | $      | 28,162 |        |   | $      | 29,836 |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Services                                      |                          |        | 19,076 |        |      |        | 24,343 |        |      |        | 33,216 |        |   |        | 50,867 |        |   |        | 65,321 |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Third-party equipment and software            |                          |        | 3,574  |        |      |        | 3,254  |        |      |        | 3,387  |        |   |        | 4,040  |        |   |        | 3,087  |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                       |                                               | Total revenues           |        |        | 34,306 |      |        |        | 41,711 |      |        |        | 57,646 |   |        |        | 83,069 |   |        |        | 98,244 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Operating expenses:                                    |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of software                              |                          |        | 1,230  |        |      |        | 1,577  |        |      |        | 2,053  |        |   |        | 2,491  |        |   |        | 2,583  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of services                              |                          |        | 6,937  |        |      |        | 9,844  |        |      |        | 14,375 |        |   |        | 24,763 |        |   |        | 30,849 |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of third-party equipment and software    |                          |        | 2,750  |        |      |        | 2,516  |        |      |        | 2,631  |        |   |        | 3,146  |        |   |        | 2,640  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Software development                          |                          |        | 6,577  |        |      |        | 8,380  |        |      |        | 11,214 |        |   |        | 15,014 |        |   |        | 16,663 |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Sales and marketing                           |                          |        | 4,178  |        |      |        | 5,000  |        |      |        | 6,643  |        |   |        | 10,353 |        |   |        | 11,592 |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | General and administrative                    |                          |        | 2,790  |        |      |        | 3,018  |        |      |        | 3,558  |        |   |        | 4,163  |        |   |        | 5,939  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Amortization of purchased intangibles         |                          |        |       |        |      |        |       |        |      |        | 26     |        |   |        | 687    |        |   |        | 1,051  |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Stock option compensation                     |                          |        |       |        |      |        | 867    | (1)    |      |        |       |        |   |        |       |        |   |        |       |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Acquisition and offering costs                |                          |        |       |        |      |        |       |        |      |        | 320    | (2)    |   |        | 1,475  | (3)    |   |        |       |       
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchased in-process research and development |                          |        |       |        |      |        | 394    | (1)    |      |        |       |        |   |        | 2,500  | (3)    |   |        |       |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                       |                                               | Total operating expenses |        |        | 24,462 |      |        |        | 31,596 |      |        |        | 40,820 |   |        |        | 64,592 |   |        |        | 71,317 | 
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Income from operations                                 |                                               |                          | 9,844  |        |        |      | 10,115 |        |        |      | 16,826 |        |        |   | 18,477 |        |        |   | 26,927 |       
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income, net                                   |                                               |                          | 384    |        |        |      | 392    |        |        |      | 781    |        |        |   | 1,066  |        |        |   | 1,166  |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Income before income taxes                             |                                               |                          | 10,228 |        |        |      | 10,507 |        |        |      | 17,607 |        |        |   | 19,543 |        |        |   | 28,093 |       
|                                                      
|                                                      
|                                                      
|                                                      
|Provision for income taxes                             |                                               |                          | 102    |        |        |      | 54     |        |        |      | 5,898  |        |        |   | 7,788  |        |        |   | 10,881 |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Net income                                             |                                               | $                        | 10,126 |        |        | $    | 10,453 |        |        | $    | 11,709 |        |        | $ | 11,755 |        |        | $ | 17,212 |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Diluted net income per share                           |                                               |                          |        |        |        |      |        |        |        |      |        |        |        | $ | 0.64   |        |        | $ | 0.97   |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Weighted average shares, diluted                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   | 18,235 |        |        |   | 17,732 |       
|                                                       |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Pro Forma Statement of Operations Data (Unaudited)(4): |                                               |                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|Provision for income taxes                             |                                               | $                        | 3,884  |        |        | $    | 4,092  |        |        | $    | 6,780  |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|Net income                                             |                                               |                          | 6,344  |        |        |      | 6,415  |        |        |      | 10,827 |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|Diluted net income per share                           |                                               | $                        | 0.39   |        |        | $    | 0.39   |        |        | $    | 0.61   |        |        |   |        |        |        |   |        |       
|                                                      
|                                                      
|                                                      
|                                                      
|Weighted average shares, diluted                       |                                               |                          | 16,279 |        |        |      | 16,282 |        |        |      | 17,882 |        |        |   |        |        |        |   |        |       

|                                                 |  |              |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------ |  | ------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                 |  |             
|                                                 |  | December 31,
|                                                 |  |             
|                                                 |  | 1995         |        | 1996 |  | 1997 |        | 1998 |  | 1999
|                                                 |  |              |        |      |  |      |        |      |  |     
|Balance Sheet Data:                              |  |              |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|                                                
|                                                
|                                                
|                                                
|Cash, cash equivalents and marketable securities |  | $            | 8,118  |      |  | $    | 9,381  |      |  | $    | 25,832 |  |  | $ | 33,376 |  |  | $ | 29,245 | 
|                                                
|                                                
|                                                
|                                                
|Working capital                                  |  |              | 5,641  |      |  |      | 7,309  |      |  |      | 20,132 |  |  |   | 29,662 |  |  |   | 32,174 | 
|                                                
|                                                
|                                                
|                                                
|Total assets                                     |  |              | 18,405 |      |  |      | 21,129 |      |  |      | 40,571 |  |  |   | 60,711 |  |  |   | 62,435 | 
|                                                
|                                                
|                                                
|                                                
|Total shareholders equity                       |  |              | 9,671  |      |  |      | 12,233 |      |  |      | 25,814 |  |  |   | 41,406 |  |  |   | 47,242 | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 1996, the Company incurred non-recurring, non-cash charges of
	$867,000 for stock option compensation and $394,000 for purchased
	 in-process research and development. Exclusive of these charges,
	 income from operations, net income, pro forma net income and pro
	 forma diluted net income per share for 1996 would have been
	$11.4 million, $11.7  million, $7.2 million and
	$0.44, respectively.
|   
|(2) | In 1997, the Company incurred a non-recurring, non-cash charge of
	 $320,000 for acquisition costs. Exclusive of this charge, income
	 from operations, net income, pro forma net income and pro forma
	diluted net income per share for 1997 would have been
	$17.1 million, $12.0 million, $11.1  million and
	$0.62, respectively.                                                                         

15



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | In 1998, the Company incurred non-recurring, non-cash charges of
        $1.5 million for acquisition costs and $2.5 million for
        purchased in-process research and development. Exclusive of these
         charges, income from operations and net income for 1998 would
        have been $22.5 million and $15.7 million, respectively.                                                             
|   
|(4) | Prior to February 25, 1997, Deltek (excluding Harper and
        Shuman) elected to be treated as an S Corporation and was
        not subject to federal and certain state income taxes. The pro
        forma statement of operations data reflects federal and state
        income taxes based on applicable tax rates as if Deltek had not
        elected S Corporation status for the periods indicated.






|        |                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND 
         RESULTS OF OPERATIONS

The following information should be read in conjunction with the
financial statements and the notes thereto included elsewhere
herein. Except for historical information, certain statements in
this Managements Discussion and Analysis of Financial
Condition and Results of Operations are forward-looking. These
forward-looking statements are subject to various risks and
uncertainties, including the demand for products, the size and
timing of specific sales, the level of product and price
competition, the length of sales cycles, economic conditions, and
 the Companys ability to develop and market new products
and control costs. The Company undertakes no obligation and does
not intend to update, revise or otherwise publicly release the
result of any revisions to these forward-looking statements that
may be made to reflect future events or circumstances.

Overview

Deltek is a leading provider of enterprise software products that
 enable project-oriented organizations and professional service
firms to more effectively manage, operate and grow their
operations. From 1985 through 1994, without considering revenues
from the Companys 1998 acquisition of Harper and Shuman,
substantially all of the Companys revenues were derived
from licenses of its System1 business software, designed
primarily for organizations providing products or services under
contracts with the federal government, and services related to
System1. In 1992, the Company began development of Costpoint, an
advanced client/ server-based, enterprise-wide business software
system, which was commercially released in June 1995 and
which represented approximately 55.5% of the Companys
license fees for the year ended December 31, 1999. In
addition to the above, the primary software product suites we
currently market consist of Project Workplace, a web-enabled,
front-office and customer relationship management solution for
project-based environments; Advantage, an integrated,
project-focused accounting system designed for professional
services firms; GCS Premier, project accounting software for
small-to mid-sized organizations providing products or services
under contracts with the federal government; and ET Enterprise,
an advanced employee timekeeping system.

The Companys revenues consist of fees derived from the
licensing of its software products, service revenues from
consulting and other services, and revenues from the resale of
third-party equipment and the sublicensing of third-party
software. For certain of its software products, the Company
typically grants its customers a right of return for a full or
partial refund of the license fee during a refund period, which
is generally 60 to 90 days from the date of the initial
software delivery. The Company occasionally has provided, and may
 in the future provide, longer refund periods for larger, more
complex Costpoint installations. Costpoint license fees are
recognized upon the expiration of the applicable refund period
and are recorded as deferred revenues until recognized. Because
of customers refund rights and the varying length of
applicable refund periods, deferred revenues at the end of a
quarter do not necessarily reflect revenues that the Company will
 recognize in a succeeding quarter. The Company generally
recognizes license fees from its Advantage, System1 and ET
Enterprise products upon delivery. Implementation and other
consulting services are provided on a time and materials basis,
billed monthly and recognized as the services are performed.
Ongoing support services are provided for fees that are payable
quarterly and initially represent between 15% and 20% of the
related software license fee on an annual basis. Revenues from
ongoing support services are recognized over the quarter in which
 the services are provided. Training is billed by the hour or per
 class and recognized as the services are provided. Revenues from
 third-party equipment and software are derived from the resale

16



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##### Table of Contents





In April 1998, the Company acquired substantially all of the
 assets of SalesKit and assumed certain related liabilities. The
purchase price consisted of $6.1 million of cash in addition
 to three-year warrants with an estimated fair value of $932,000.
 The warrants are exercisable for 130,000 shares of Common Stock
at an exercise price of $22.00 per share. The acquisition has
been accounted for as an asset purchase. The Company assigned
$2.5 million of the SalesKit purchase price to in-process
research and development based upon an independent appraisal and
expensed this amount in 1998. In the opinion of management, the
acquired in-process research and development had not yet reached
technological feasibility and had no alternative future uses.

In May 1998, the Company completed its acquisition of Harper
 and Shuman by exchanging approximately 686,000 shares of its
Common Stock for all of the common stock of Harper and Shuman.
The acquisition constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests. Accordingly, all
prior period consolidated financial statements presented have
been restated to include the combined results of operations,
financial position and cash flows of Harper and Shuman as though
it had always been a part of Deltek.

17



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##### Table of Contents



Results of Operations

The following table sets forth, for the periods indicated,
information derived from the consolidated statements of
operations of the Company expressed as a percentage of total
revenues, and the percentage change in such items compared to the
 same period in the prior year. There can be no assurance that
the trends in revenue growth or operating results will continue
in the future.

|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |      |       | 
|------------------------------------------------------ | --------------------------------------------- | ---------------------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- |  | ---- | ---- | ----- | 
|                                                       |                                               |                             
|                                                       |                                               | Percentage of Total Revenues
|                                                       |                                               | Year Ended December 31,     
|                                                       |                                               |                             
|                                                       |                                               | 1997                         |      | 1998 |       | 1999
|                                                       |                                               |                              |      |      |       |     
|Statement of Operations Data(1):                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Revenues:                                              |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | License fees                                  |                              |      | 36.5 | %     |      |      | 33.9 | %     |  |      | 30.4 | %    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Services                                      |                              |      | 57.6 |       |      |      | 61.2 |       |  |      | 66.5 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Third-party equipment and software            |                              |      | 5.9  |       |      |      | 4.9  |       |  |      | 3.1  |      
|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                       |                                               | Total revenues               |      |      | 100.0 |      |      |      | 100.0 |  |      |      | 100.0 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Operating expenses:                                    |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of software                              |                              |      | 3.6  |       |      |      | 3.0  |       |  |      | 2.6  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of services                              |                              |      | 24.9 |       |      |      | 29.8 |       |  |      | 31.4 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of third-party equipment and software    |                              |      | 4.6  |       |      |      | 3.8  |       |  |      | 2.7  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Software development                          |                              |      | 19.4 |       |      |      | 18.1 |       |  |      | 17.0 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Sales and marketing                           |                              |      | 11.5 |       |      |      | 12.5 |       |  |      | 11.8 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | General and administrative                    |                              |      | 6.2  |       |      |      | 5.0  |       |  |      | 6.0  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Amortization of purchased intangibles         |                              |      |      |       |      |      | 0.8  |       |  |      | 1.1  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Acquisition and offering costs                |                              |      | 0.6  | (2)   |      |      | 1.8  | (3)   |  |      |     |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Purchased in-process research and development |                              |      |     |       |      |      | 3.0  | (3)   |  |      |     |      
|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                       |                                               | Total operating expenses     |      |      | 70.8  |      |      |      | 77.8  |  |      |      | 72.6  | 
|                                                      
|                                                      
|                                                      
|                                                      
|Income from operations                                 |                                               |                              | 29.2 |      |       |      | 22.2 |      |       |  | 27.4 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |                                               |                              | 1.3  |      |       |      | 1.3  |      |       |  | 1.2  |     
|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|Income before income taxes                             |                                               |                              | 30.5 |      |       |      | 23.5 |      |       |  | 28.6 |     
|                                                      
|                                                      
|                                                      
|                                                      
|Provision for income taxes                             |                                               |                              | 10.2 |      |       |      | 9.4  |      |       |  | 11.1 |     
|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|Net income                                             |                                               |                              | 20.3 | %    |       |      | 14.1 | %    |       |  | 17.5 | %   
|                                                       |                                               |                              |      |      |       |      |      |      |       |  |      |     
|Pro Forma Statement of Operations Data (Unaudited)(4): |                                               |                              |      |      |       |      |      |      |       |  |      |     
|                                                      
|                                                      
|                                                      
|                                                      
|Provision for income taxes                             |                                               |                              | 11.8 | %    |       |      |     | %    |       |  |     | %   
|                                                      
|                                                      
|                                                      
|                                                      
|Net income                                             |                                               |                              | 18.8 |      |       |      |     |      |       |  |     |     




|    |                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All amounts have been restated to reflect the acquisition of
	Harper and Shuman in May 1998, which was accounted for using
	 the pooling-of-interests method of accounting. See Note 1 of
	Notes to Consolidated Financial Statements.                                                                                                                                      
|   
|(2) | In 1997, the Company incurred a non-recurring, non-cash charge
	for acquisition costs. Exclusive of this charge, income from
	operations, net income and pro forma net income for 1997 would
	have been 29.7%, 20.9% and 19.3%, respectively, of total
	revenues.                                                                                                           
|   
|(3) | In 1998, the Company incurred non-recurring, non-cash charges for
	 acquisition costs and purchased in-process research and
	development. Exclusive of these charges, income from operations
	and net income for 1998, would have been 27.0% and 17.4%,
	respectively, of total revenues.                                                                                   
|   
|(4) | Prior to February 25, 1997, Deltek (excluding Harper and
	Shuman) elected to be treated as an S Corporation and was
	not subject to federal and certain state income taxes. The pro
	forma statement of operations data reflects federal and state
	income taxes based on applicable tax rates as if Deltek had not
	elected S Corporation status for the periods indicated.

18



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##### Table of Contents



Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998

License Fees.License fees for the year ended
December 31, 1999 increased by 5.9% to $29.8 million
from $28.1 million for the same period in 1998. The increase
 in license fees was attributable to ET Enterprise and Advantage
license fees, which increased by 26.2% and 22.3% to $3.8 and
$6.7 million, respectively, for the year ended
December 31, 1999. License fees from System1 products were
$2.5 million for the year ended December 31, 1999
compared to $2.4 million for the year ended
December 31, 1998, an increase of 2.0%. Costpoint license
fees decreased by .6% to $16.6 million for the year ended
December 31, 1999 as compared to $16.7 million for the
same period in 1998. We believe that the decline of Costpoint
license fees was due to the saturation of the Y2K upgrade market
as compared to 1998. License fees comprised 30.4% of the
Companys total revenues for 1999, compared to 33.9% for the
 comparable prior year period.

Services.Service revenues for the year ended
December 31, 1999 increased by 28.4% to $65.3 million
from $50.9 million for the same period in 1998. The increase
 in service revenues was principally attributable to increased
consulting services related to the demand to have systems such as
 Advantage and Costpoint implemented before January 1, 2000.
 Consulting service revenues increased by 39.0% to $31.9 million
for the year ended December 31, 1999 from $22.9 million
 for the same period in 1998. Other service revenues increased by
 19.0% to $33.4 million for the year ended December 31,
 1999 from $28.0 million for the same period in the prior
year, principally as a result of the addition of new customers
and the license of additional software products to existing
customers. Service revenues comprised 66.5% of the Companys
 total revenues for 1999, compared to 61.2% for the same period
in 1998.

Third-Party Equipment and Software.Revenues from
third-party equipment and software for the year ended
December 31, 1999 decreased by 23.6% to $3.1 million from
$4.0 million for the comparable period in 1998. These
revenues comprised 3.1% and 4.9% of total revenues for 1999 and
1998, respectively.

Cost of Software.Cost of software is comprised primarily
of royalties and maintenance payments to third parties,
amortization of software development costs, and the cost of
production and distribution of software and user manuals. Cost of
 software for the year ended December 31, 1999 was $2.6
million, an increase of 4.0% from $2.5 million for the same
period in 1998. This change was due to an increase in software
supplies and licensing activity.

Cost of Services.Cost of services is comprised primarily
of personnel costs for implementation and consulting services,
user training, the International User Conference and ongoing
maintenance and support. Cost of services for the year ended
December 31, 1999 increased by 24.6% to $30.9 million from
$24.8 million for the same period in 1998. The increase in
cost of services was primarily due to increases in services
personnel and the related costs associated with additional
personnel, such as training and payroll overhead. Cost of
services represented 47.2% and 48.7% of service revenues for the
year ended December 31, 1999 and 1998, respectively. The
decrease in cost of services as a percentage of service revenues
was due to increased personnel utilization. Improved training and
 tenure of consultants, decreased cost and time per engagement.
Exclusive of the users conference and reimbursable travel
expenses which are billed at cost, cost of services represented
37.2% and 42.3% of related service revenue for the years ended
December 31, 1999 and 1998, respectively.

Cost of Third-Party Equipment and Software.Cost of
third-party equipment and software consists of the costs of
computer and peripheral equipment and license fees and royalties
for third-party software. Cost of third-party equipment and
software for the year ended December 31, 1999 decreased to
$2.6 million from $3.1 million for the same period in the
prior year. As a percentage of related revenues, cost of
third-party equipment and software products represented 85.5% and
 77.9% for the year ended December 31, 1999 and 1998,
respectively. The increase in these costs as a percentage of
related revenues was the result of reduced margins on third party
 equipment sales.

Software Development.Software development costs consist
primarily of the personnel costs of analysts and programmers who
research, develop, maintain and enhance the Companys
existing software product lines and develop new products.
Software development costs for the year ended December 31,
1999 increased by 11.0% to $16.7 million from
$15.0 million for the same period in 1998. This increase was
 due primarily to

19



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##### Table of Contents





Sales and Marketing.Sales and marketing expenses consist
primarily of the costs of the Companys sales and marketing
personnel as well as the costs of advertising, direct mail and
other sales and marketing activities. Commission expense also
increased significantly. Sales and marketing expenses for the
year ended December 31, 1999 increased by 12.0% to
$11.6 million from $10.4 million for the same period in
 1998. While sales and marketing expenses increased in total, as
a percentage of total revenues they decreased by .7%. Sales and
marketing expenses represented 11.8% of the Companys total
revenues for the year ended December 31, 1999, compared to
12.5% for the same period in 1998.

General and Administrative.General and administrative
expenses consist primarily of the personnel costs of the
Companys management, administrative and finance staffs as
well as the costs of insurance programs, bad debt expenses,
professional fees and other infrastructure costs. General and
administrative expenses for the year ended December 31, 1999
 increased by 42.7% to $6.0 million from $4.2 million
for the same period in 1998. This increase was due first and
foremost to the Companys overall growth and an increase in
general and administrative personnel. To a lesser extent, an
increase in bad debt expense for 1999 contributed. General and
administrative expenses represented 6.0% of the Companys
total revenues for the year ended December 31, 1999,
compared to 5.0% for the same period in 1998.

Acquisition & Offering Costs.There were no
acquisition and offering costs in 1999. A charge of
$1.5 million was recorded for the year ended
December 31, 1998 for the transaction costs related to the
acquisition of Harper and Shuman which included the offering
costs to register the shares and warrants for the acquisition of
Harper and Shuman and SalesKit Software Corporation. The
acquisition of Harper and Shuman was accounted for as a
pooling-of-interests. See  Overview.

Purchased In-Process Research and Development.There were
no purchased in-process research and development expenses in
1999. A charge of $2.5 million was recorded during the year
ended December 31, 1998 for the appraised valuation of the
purchased in-process research and development costs acquired from
 SalesKit. See  Overview.

Interest Income.Interest income results from investment
and, to a lesser extent, from installment financing. Interest
income for the year ended December 31, 1999 increased by
9.4% to $1.2 million from $1.1 million for the same
period in 1998. This increase is due to better returns on
marketable securities.

Income Tax Provision.The Companys effective tax
rate for the year ended December 31, 1999 was 38.7%, as
compared to the pro forma effective tax rate of 39.9% for the
same period in 1998. The tax rate for the year ended
December 31, 1998 was affected by the nondeductible nature
of a majority of the transaction costs for the acquisition of
Harper and Shuman.

Year Ended December 31, 1998 Compared to Year Ended
December 31, 1997

License Fees.License fees for the year ended
December 31, 1998 increased by 33.8% to $28.2 million
from $21.0 million for the same period in 1997. The increase
 in license fees was principally attributable to Costpoint
license fees, which increased by 41.4% to $16.7 million for
the year ended December 31, 1998 from $11.7 million for
 the same period in 1997, reflecting increases in the number of
modules licensed and the average size of new system
installations, offset somewhat by discounts granted to System 1
users migrating to Costpoint systems. Advantage license fees
increased by 51.1% to $5.5 million for the year ended
December 31, 1998 as compared to $3.6 million for the
same period in 1997. License fees from System1 products were
$2.4 million for the year ended December 31, 1998
compared to $3.5 million for the year ended
December 31, 1997, a decrease of 31.3%. The decline in
System1 license fees was the result of increased licenses of the
Companys advanced client/ server system, Costpoint, to new
customers. License fees for Electronic Timesheet increased by
61.2% to $3.0 million for the year ended December 31,
1998 from $1.8 million for the

20



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##### Table of Contents





Services.Service revenues for the year ended
December 31, 1998 increased by 53.1% to $50.9 million
from $33.2 million for the same period in 1997. The increase
 in service revenues was principally attributable to increased
consulting services related to new implementations of Costpoint
systems. Consulting service revenues increased by 102.3% to
$22.9 million for the year ended December 31, 1998 from
 $11.3 million for the same period in 1997. Other service
revenues increased by 27.7% to $28.0 million for the year
ended December 31, 1998 from $21.9 million for the same
 period in the prior year, principally as a result of the
addition of new customers and the license of additional software
products to existing customers and, to a lesser extent, increases
 in service rates. Service revenues comprised 61.2% of the
Companys total revenues for 1998, compared to 57.6% for the
 same period in 1997.

Third-Party Equipment and Software.Revenues from
third-party equipment and software for the year ended
December 31, 1998 increased by 19.3% to $4.0 million from
$3.4 million for the comparable period in 1997. These
revenues comprised 4.9% and 5.9% of total revenues for 1998 and
1997, respectively.

Cost of Software.Cost of software is comprised primarily
of royalties and maintenance payments to third parties,
amortization of software development costs, and the cost of
production and distribution of software and user manuals. Cost of
 software for the year ended December 31, 1998 was
$2.5 million, an increase of 21.3% from $2.1 million
for the same period in 1997. This change was due to an increase
in licensing activity.

Cost of Services.Cost of services is comprised primarily
of personnel costs for implementation and consulting services,
user training and ongoing maintenance and support. Cost of
services for the year ended December 31, 1998 increased by
72.3% to $24.8 million from $14.4 million for the same
period in 1997. The increase in cost of services was primarily
due to increases in services personnel. Cost of services
represented 48.7% and 43.3% of service revenues for the year
ended December 31, 1998 and 1997, respectively. The increase
 in cost of services as a percentage of service revenues
primarily reflected the increase in consulting revenues as a
percentage of service revenues. The Company earns a lower margin
on its consulting revenues than on its ongoing support service
revenues. To a lesser extent, cost of services as a percentage of
 service revenues increased due to hiring of additional telephone
 support personnel to service the Companys growing customer
 base. Exclusive of the users conference and reimbursable travel
expenses which are billed at cost, cost of services represented
42.3% and 37.3% of related service revenue for the years ended
December 31, 1998 and 1997, respectively.

Cost of Third-Party Equipment and Software.Cost of
third-party equipment and software consists of the costs of
computer and peripheral equipment and license fees and royalties
for third-party software. Cost of third-party equipment and
software for the year ended December 31, 1998 increased to
$3.1 million from $2.6 million for the same period in the
prior year. As a percentage of related revenues, cost of
third-party equipment and software products represented 77.9% and
 77.7% for the year ended December 31, 1998 and 1997,
respectively. The slight increase in these costs as a percentage
of related revenues was the result of changes in the product mix
of equipment and software sold.

Software Development.Software development costs consist
primarily of the personnel costs of analysts and programmers who
research, develop, maintain and enhance the Companys
existing software product lines and develop new products.
Software development costs for the year ended December 31,
1998 increased by 33.9% to $15.0 million from
$11.2 million for the same period in 1997. This increase was
 due primarily to hiring additional personnel. Software
development costs represented 18.1% and 19.5% of total revenues
for the year ended December 31, 1998 and 1997, respectively.

Sales and Marketing.Sales and marketing expenses consist
primarily of the costs of the Companys sales and marketing
personnel as well as the costs of advertising, direct mail and
other sales and marketing activities. Sales and marketing
expenses for the year ended December 31, 1998 increased by
55.8% to $10.4 million from $6.6 million for the same
period in 1997. This increase was due primarily to hiring
additional personnel and increased marketing activities. The
Company expects sales and marketing expenses

21



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##### Table of Contents





General and Administrative.General and administrative
expenses consist primarily of the personnel costs of the
Companys management, administrative and finance staffs as
well as the costs of insurance programs, bad debt expenses,
professional fees and other infrastructure costs. General and
administrative expenses for the year ended December 31, 1998
 increased by 17.0% to $4.2 million from $3.6 million
for the same period in 1997. This increase was due primarily to
the Companys overall growth. General and administrative
expenses represented 5.0% of the Companys total revenues
for the year ended December 31, 1998, compared to 6.2% for
the same period in 1997.

Acquisition & Offering Costs.A charge of
$1.5 million was recorded for the year ended
December 31, 1998 for the transaction costs related to the
acquisition of Harper and Shuman and the offering costs to
register the shares and warrants for the acquisition of Harper
and Shuman and SalesKit Software Corporation. The acquisition of
Harper and Shuman was accounted for as a pooling-of-interests.
See  Overview.

Purchased In-Process Research and Development.A charge of
 $2.5 million was recorded during the year ended
December 31, 1998 for the appraised valuation of the
purchased in-process research and development costs acquired from
 SalesKit. See  Overview.

Interest Income.Interest income results from investment
and, to a lesser extent, from installment financing. Interest
income for the year ended December 31, 1998 increased by
36.5% to $1,066,000 from $781,000 for the same period in 1997.
This increase is due to the higher level of cash balances
available for investment.

Income Tax Provision.The Companys effective tax
rate for the year ended December 31, 1998 was 39.9%, as
compared to the pro forma effective tax rate of 38.5% for the
same period in 1997. The tax rate for the year ended
December 31, 1998 was affected by the nondeductible nature
of a majority of the transaction costs for the acquisition of
Harper and Shuman.

Liquidity and Capital Resources

The Company has financed its operations almost exclusively from
cash flow from its operations. As of December 31, 1999, the
Company had cash and cash equivalents of $6.0 million,
marketable securities of $23.3 million and working capital
of $32.2 million.

For the year ended December 31, 1999, the Companys net
 cash provided by operating activities was $14.9 million.
Accounts receivable, net of the allowance for doubtful accounts,
were $13.4 million as of December 31, 1999, compared to
 $11.8 million as of December 31, 1998. Accounts
receivable days sales outstanding was 56 days as of
December 31, 1999, compared to 60 days as of
December 31, 1998.

Investing activities utilized $6.4 million for the year
ended December 31, 1999. This amount included $605,000 in
acquired marketable securities, $3.9 million in purchased
property and equipment and $3.0 million of capitalized
software production costs.

Financing activities for the year ended December 31, 1999
consisted primarily of $497,000 in proceeds from the exercise of
stock options and $689,000 from the issuance of stock under the
Companys employee stock purchase plan. This was offset by
$13.3 million of common stock purchased and retired.

The Company believes that its current liquidity, together with
anticipated cash flow from operations, will satisfy the
Companys anticipated working capital and capital
expenditure requirements through the foreseeable future. However,
 depending on its rate of growth, profitability and other
factors, some of which are not in the Companys control, the
 Company believes additional financing may be required to meet
its working capital requirements or capital expenditure needs,
including acquisitions, in the future. The Company may consider
additional appropriate acquisitions should such opportunities
present themselves. There can be no assurance that additional
financing will be available when required or, if available, that
any such financing will be on terms satisfactory to the Company.

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Factors That May Affect Future Results and Market Price of
Stock

We may not be able to overcome loss of growth previously
attributable to businesses that purchased software in order make
their systems Y2K compliant.Management believes that the
growth in demand for the Companys products over the past
several years was due in part to its customers needs to
update their IT systems in preparation for the year 2000. By the
middle of 1999, most project-oriented companies that needed to
convert to year 2000 compliant systems (and thus were potential
customers for the Companys products) likely had purchased
year 2000 compliant systems. Management believes that the future
growth in demand for the Companys products will depend in
part upon the Companys ability to offset the loss of any
growth attributable to its customers needs to update their
IT systems in preparation for the year 2000. There can be no
assurance that the growth in demand for the Companys
products experienced over the past several years can be
sustained. If such growth is not sustainable, the Companys
business, operating results and financial condition could be
materially adversely impacted. Accordingly, the Companys
business, operating results and financial condition could be
materially adversely impacted if the rate of sales for the
Companys products are delayed or substantially reduced.

We may experience a downturn in sales from several of our core
 back office software products due to our inability to move their
 related technologies to a completely web-based architecture.IT directors of many companies now believe that all of their
enterprise software applications should be deployable over the
web. Other than Project Workplace, ET Enterprise, and the
Business Intelligence reporting tools components of Costpoint,
many of our software applications can not be operated over the
Internet without the use of remote control software technology.
It may take several years to rebuild many of these application
products in technologies that will fully support a web-based,
thin client architecture.

We may experience fluctuations in quarterly operating results
that may adversely impact the price of our stock.Our future
results may vary from quarter to quarter depending upon a number
of factors including the following:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | the discretionary nature of our customers purchase and
	budget cycles;                      
| |  | demand for our products;                                                                     
| |  | the size and timing of specific sales;                                                       
| |  | the delay or deferral of customer implementations;                                           
| |  | the level of product and price competition that we encounter;                                
| |  | the length of our sales cycles;                                                              
| |  | our ability to attract and retain personnel;                                                 
| |  | the timing of new hires;                                                                     
| |  | the timing of our new product introductions and product
	enhancements and of our competitors;
| |  | the mix of products and services we sell;                                                    
| |  | the activities of and acquisitions by our competitors;                                       
| |  | the timing of our national user conference;                                                  
| |  | general economic conditions;                                                                 
| |  | our ability to develop and market new software products and
	enhancements;                   
| |  | our ability to control costs; and                                                            
| |  | our ability to collect receivables.                                                          

Our operating results, particularly our quarterly results
could be significantly affected by the loss or delay of
individual orders.Our revenues from license fees are
difficult to predict because of the length and variability of our
 sales cycles (typically three to 18 months). Our operating
expenses, on the other hand, are based on anticipated revenue
trends. A high percentage of our operating expenses are
relatively fixed. A delay in operating results from quarter to
quarter. To the extent we incur expenses before obtaining
anticipated revenues, our operating results could be materially
adversely affected.

For most of our software products, we typically grant customers a
 right of return for a full or partial refund of the license fee
during the refund period. This is in part done to provide
additional comfort to the Companys prospective customers as
 well as to demonstrate the Companys growing confidence in
the reliability and stability of its core products. Refund
periods generally range from 60 to 90 days from the date of

23



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Our operating results for any quarter are subject to significant
variation, and we believe that period-to-period comparisons of
our operating results are not necessarily meaningful and should
not be relied upon as indications of future performance. We also
believe that many of our potential customers will continue to
defer additional software expenditures beyond the final quarter
of 1999 and we cannot predict when customer resources will again
be available for the improvement of internal business systems.
Our future quarterly operating results from time to time may not
meet the expectations of market analysts or investors. In that
event, the price of our common stock would likely be materially
adversely affected.

Future revenue growth is dependent in part on our successful
introduction of Project Workplace.During 1999, we continued
development on and released beta versions of Project Workplace, a
 front-office, customer relationship management
(CRM) software application designed for project-oriented
businesses, in August 1999. The general release was on
March 10, 2000. Our future revenue growth from software
sales is dependent, in part, on our ability to successfully
launch this and additional new products. CRM applications are, by
 their nature, difficult to develop, implement and market and may
 require substantial customization at customer sites.

Internet-enabled products present unique risks. Our newest
 product, Project Workplace, released in March 2000, is an
internet-enabled software product. The increased commercial use
of the Internet could require substantial modification and
customization of our products and the introduction of new
products. We may not be able to effectively compete in the
Internet-related products and services market. In addition,
critical issues concerning the commercial use of the Internet,
including security, demand, reliability, cost, ease of use,
accessibility, quality of service and potential tax or other
government regulation, remain unresolved and may affect the use
of the Internet as a medium to support the functionality of our
products and distribution of our software. If these critical
issues are not favorably resolved, our business, operating
results and financial condition could be materially and adversely
 affected.

We compete with a number of companies, many of which have
significantly greater financial, technical, marketing and other
resources than the Company.As our larger competitors, such
as Oracle, Peoplesoft and SAP, begin to experience a deceleration
 in their core business and refocus their marketing and sales
efforts to the middle market in which we actively markets its
products, we expect such competitors to implement increasingly
aggressive pricing programs. In addition, certain competitors
such as Oracle, Peoplesoft, SAP and Siebel, have well-established
 relationships with our current and prospective customers and
with major accounting and consulting firms that may have an
incentive to recommend such competitors over us. We also face
indirect competition from the internal MIS departments of our
potential customers. In the front-office systems market we face
competition from customers internal information technology
departments, systems integrators, as well as from other
application software providers such as Siebel and Goldmine, that
offer a variety of products and services to address this market.
Many of our customers and potential customers have attempted to
develop front office systems in-house, either alone or with the
help of systems integrators. We may not be able to compete
successfully in this market.

There can be no assurance that our products will continue to
compete favorably or that we will be successful in the face of
increasing competition from new products and enhancements
introduced by existing or new competitors. In addition, increased
 competition may result in price reductions, reduced margins and
loss of market share, any of which could have a material adverse
effect on our business, operating results and financial
condition. See Business  Competition.

Our future success is dependent upon our ability to hire and
retain employees.Our success is dependent upon our ability
to attract and retain highly skilled managerial, research and
development, consulting, customer service, sales and marketing
personnel. Although we currently are investing, and plan to
continue to invest, significant resources to expand our direct
sales force and our technical and customer support staff, we have
 at times experienced difficulties in recruiting and retaining
qualified personnel. We could be adversely affected if we are
unable to recruit qualified personnel or if senior managers or
other such personnel were to leave our employ and qualified
replacements were not available. Competition for skilled
personnel in the

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Our success will also depend in part on the continued services
 of our key employees, particularly our senior management
personnel.We do not have employment agreements with any of
our key employees and do not maintain any key-person life
insurance. The resignation or loss of Kenneth E. deLaski, the
Companys President and Chief Executive Officer, could have
a material adverse effect on our business, operating results and
financial condition.

Our success will depend on our ability to shift revenue
composition from our back-office products to our front-office
products.For the years ended December 31, 1998 and
1999, 78.6% and 77.9%, respectively, of our software revenues
were derived from licenses of our Costpoint and Advantage
software products. In addition, we generate service revenues
related to its Costpoint and Advantage products. However, it is
the Companys belief that our customers and prospects will
have a significant interest in the new front-office applications.

We face risks associated with new product development, rapid
technology change, risks associated with new product development,
 and potential liability. The business application software
market is characterized by rapidly changing technologies,
evolving industry standards, frequent new product introductions
and short product life cycles. Our future success will depend, to
 a substantial degree, upon our ability to enhance our existing
products and to develop and introduce, on a timely and
cost-effective basis, new products and features that meet
changing customer requirements and emerging and evolving industry
 standards. There can be no assurance that we will be successful
in completing the development of new products and enhancements or
 that any new product or enhancement it may introduce will
achieve market acceptance.

The development of new, technologically advanced software
products is a complex and uncertain process requiring high levels
 of innovation, as well as the accurate anticipation of
technological and market trends. The introduction of new or
enhanced products also requires us to manage the transition from
or integration with older products in order to minimize
disruption in sales of existing products. There can be no
assurance that our development efforts will progress
satisfactorily or keep pace with industry developments. We
allocate resources for research and development projects based on
 planned product introductions and enhancements; however, actual
expenditures may significantly differ from amounts allocated. We
have experienced, and may experience in the future, delays in the
 introduction of our products, due to factors internal and
external to us. Additionally, because our software products are
complex, there can be no assurance that, despite testing, errors
will not be found after commencement of commercial shipments,
resulting in loss of or delay in market acceptance. The sale and
support of our software products entails the risk of product
liability claims. In addition, the failure to perform services to
 a customers expectations may result in our not being paid
for services rendered, may damage our reputation and may result
in a claim being brought against us. We maintain errors and
omissions insurance; however, a successful claim for product or
service liability brought against us could have a material
adverse effect upon our business, operating results and financial
 condition. See Business  Products and
 Product Development.

We may be subject to risks from acquisition activities. As
 part of our growth strategy, we have acquired or invested in,
and from time to time may acquire or invest in, complementary
businesses, technologies and product lines. In order to
successfully integrate acquired products into our sales and
marketing channels, we must train our sales force on acquired
products and integrate employees of the acquired companies with
respect to sales commission, territories, product positioning and
 training. In addition, certain of such acquired assets, licenses
 or technology may require significant additional development,
such as the completion of product functionality, before the
commercial release of products. Additional risks from
acquisitions include disruption of our ongoing business;
diversion of management from day-to-day operations; amortization
of acquired intangible assets; impairment of relationships with
customers, employees and strategic partners; loss of personnel;
difficulty of maintaining uniform standards, controls, procedures
 and policies; and potential

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Our continued success depends upon our ability to manage
growth. We are currently experiencing growth and expansion,
internally and through acquisitions, which have placed, and will
continue to place, a strain on our administrative, operational
and financial resources and demands on our systems and controls.
This growth has resulted in an increasing level of responsibility
 for our management personnel. Our ability to manage our growth
successfully will also require us to continue to expand and
improve our operational, management and financial systems and
controls on a timely basis. If our management is unable to manage
 growth effectively, our business, operating results and
financial condition could be materially adversely affected.

We face the uncertainty of expansion into new markets. We
believe that our future success is dependent, in part, on our
ability to successfully penetrate new project-oriented markets
and , to adapt our product-development and marketing strategies
to meet the developing needs of our marketplace, and to expand
internationally. Although we have an ongoing program to further
customize and add functionality to our products in order to
address the specific needs of customers in new markets, our
limited resources may restrict our ability to track developments
in these markets, to develop appropriate products, and to
effectively pursue product-development and marketing activities
and strategies in multiple markets simultaneously. There can be
no assurance that our products will be accepted in new markets.
Our inability to successfully expand the markets for our products
 or develop marketing strategies could have a material adverse
effect on our business, operating results and financial
condition.

We are partially dependent upon organizations with federal
government contracts. A significant portion of our total
revenues is derived from customers that provide products and
services under federal government contracts. We believe that, at
least in the near term, such organizations will continue to
represent a large percentage of our customers and account for a
significant percentage of our total revenues. While such
organizations are subject to the same general economic conditions
 as other businesses, demand for their products and services is
also dependent upon applicable procurement policies and the
availability of appropriated funds. Any significant downsizing,
consolidation or liquidation of such organizations as a result of
 changes in procurement policies, budget reductions or
reallocations or other causes could adversely affect our
business, operating results and financial condition.

We continue to rely on third-party software development tools.We license from third parties certain software development
tools that we utilize in the development of our products.
Accordingly, we are dependent upon such third parties
abilities to deliver quality products, correct errors, ensure
year 2000 functionality, support their current products, develop
new and enhanced products on a timely and cost-effective basis
and respond to emerging industry standards and other
technological changes. Should these third-party development tools
 become unavailable, or should their developers fail to
adequately support or enhance them, we would be required to
establish relationships with alternative third-party providers
and to rewrite our products using different development tools.
Although we believe that other development tools with comparable
functionality are currently available from other third parties,
there can be no assurance that, if needed, replacement products
could be obtained on reasonable terms. In addition, there can be
no assurance that we could successfully rewrite our products
using different development tools or that it would not encounter
substantial delays in doing so. Our inability to rewrite our
products using different development tools on a timely and
cost-effective basis could have a material adverse effect on our
business, operating results and financial condition. See
Business  Products and
 Product Development.

We may be unable to adequately protect our proprietary rights
and be subject to risks of infringement.Our success and
ability to compete is dependent in part upon its our proprietary
software. We rely on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual
provisions to establish and protect our rights in our software.
Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy, design around or
reverse engineer aspects of our products or to obtain and use
information that we regard as proprietary. Furthermore, we have
no patents, and existing copyright law affords only limited
protection. In addition, the laws of some countries do not
protect our

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There are currently no claims pending against us relating to the
infringement of any proprietary rights of third parties. There
can be no assurance, however, that third parties will not claim
infringement by us of their intellectual property rights. We
expect that software product developers will increasingly be
subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality
of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming to defend,
 result in costly litigation, divert managements attention
and resources from day-to-day operations or cause delays in the
delivery or implementation of our products. In addition, such
claims could require us to discontinue the use of certain
software codes or processes, cease the manufacture, use and sale
of infringing products, and develop non-infringing technology or
to obtain licenses to the alleged infringing technology. There
can be no assurance we would be able to develop alternative
technologies or to obtain such licenses or, if a license were
obtainable, that the terms would be commercially acceptable to
us. In the event of a successful claim of product infringement
against us and our failure or inability to license the infringed
or similar technology, our business, operating results and
financial condition could be materially adversely affected.

Our principal shareholders have the ability to exercise
control.Our principal shareholders, Kenneth E. deLaski, our
President and Chief Executive Officer, and Donald deLaski, our
Chairman, together with their affiliates, in the aggregate own
approximately 50.4% of the outstanding shares of the Common Stock
 as of March 24, 2000. As a result, these shareholders,
acting together, are able to effectively control substantially
all matters requiring approval by our shareholders including the
election of the Board of Directors and significant corporate
transactions. Such influence by such shareholders could delay or
prevent a change in control, impede a merger, consolidation,
takeover or other business combination involving us, or
discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us.

A substantial number of our shares are eligible for resale,
which could adversely affect the market price.Substantially
all of our restricted securities are available for resale
pursuant to Rule 144 under the Securities Act of 1933, as
amended (the Securities Act) including the shares
owned by the principal shareholders. In October 1998,
pursuant to contractual obligations to do so, we registered an
aggregate of 516,751 shares of Common Stock and 130,000 shares of
 Common Stock issuable pursuant to outstanding warrants under the
 Securities Act. Sales of substantial amounts of such restricted
or registered securities could adversely affect prevailing market
 prices for the Common Stock.

The market price of our common stock is volatile which could
materially impact your investment.The market price of our
Common Stock has historically been volatile. We believe factors
such as quarterly fluctuations in results of operations,
announcements of new products and acquisitions by us or by our
competitors, changes in earnings estimates by analysts, changes
in accounting treatments or principles and other factors may
cause the market price of the Common Stock to fluctuate, perhaps
substantially. The market price of our Common Stock also may be
affected by our ability to meet market analysts
expectations, and any failure to meet such expectations could
have a material adverse effect on the market price of our Common
Stock. In addition, securities prices for many technology
companies fluctuate widely for reasons, which may be unrelated to
 operating results of such companies. These fluctuations, as well
 as general economic, political and market conditions, may
adversely affect the market price of our Common Stock in the
future. In the past, following periods of volatility in the
market price of a companys securities, class action
litigation has often been instituted against such company. Any
such litigation instigated against us could result in substantial
 costs and a diversion of managements attention and
resources from day-to-day operations, which could have a material
 adverse effect on our business, operating results and financial
condition. See Market for Registrants Common Equity
and Related Stockholder Matters.

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|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7 for discussion.






|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this Item is set forth below beginning on
 page F-1, and is incorporated herein by this reference.






|        |                                                                     
|------- | --------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
	DISCLOSURE

Not applicable.

PART III






|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by
reference to the registrants definitive proxy statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of
 the fiscal year covered by this Form 10-K.






|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

The information required by this item is incorporated by
reference to the registrants definitive proxy statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of
 the fiscal year covered by this Form 10-K.






|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by
reference to the registrants definitive proxy statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of
 the fiscal year covered by this Form 10-K.






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by
reference to the registrants definitive proxy statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of
 the fiscal year covered by this Form 10-K.

PART IV






|         |                                                                  
|-------- | -----------------------------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
	8-K

(a)  Documents filed as a part of this report:



| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.  Financial Statements:The financial statements
	listed in the accompanying Index to Financial Statements and
	Schedule are filed as part of this report and incorporated herein
	 by reference.                   
|
| | 2.  Financial Statement Schedules:The financial
	statement schedules listed in the accompanying Index to Financial
	 Statements and Schedules are filed as part of this report and
	incorporated herein by reference.
|
| | 3.  Exhibits:The exhibits listed in the following
	Exhibit Index are incorporated herein by reference.                                                                                                               

28



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EXHIBIT INDEX

|            |          |                        |  |                                                                                                                                                                                                                                               
|----------- | -------- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          | Description of Exhibit
|            |          |                       
|            | 2.1(1)   |                        |  | Asset Purchase Agreement dated February 12, 1998 between
	SalesKit Software Corporation, Arch Acquisition Corp. and the
	Company.                                                                                                             
|            | 2.2(2)   |                        |  | Agreement and Plan of Reorganization among Deltek Systems, Inc.,
	Turtledove Acquisition Corp., Chester A. Shuman, the Harper and
	Shuman, Inc. Employee Stock Ownership Plan and Trust and the
	other shareholders of Harper and Shuman, Inc.
|            | 3.1(3)   |                        |  | Amended and Restated Articles of Incorporation of the Registrant.                                                                                                                                                                             
|            | 3.2(3)   |                        |  | Amended and Restated Bylaws of the Registrant.                                                                                                                                                                                                
|            | 4.1(4)   |                        |  | Specimen Common Stock certificate of the Registrant.                                                                                                                                                                                          
|            | 4.2(1)   |                        |  | Form of Warrant issued to SalesKit Software Corporation                                                                                                                                                                                       
|            | 10.1(3)  |                        |  | 1987 Employee Stock Option Plan.                                                                                                                                                                                                              
|            | 10.2(3)  |                        |  | Employee Time Accelerated Stock Option Plan (revised).                                                                                                                                                                                        
|            | 10.3(3)  |                        |  | 1996 Stock Option Plan.                                                                                                                                                                                                                       
|            | 10.4(3)  |                        |  | 1996 Employee Stock Purchase Plan.                                                                                                                                                                                                            
|            | *10.5(5) |                        |  | OEM Software License Agreement by and between the Company and
	Centura Software Corporation dated as of March 1, 1993, as
	amended.                                                                                                           
|            | *10.6(5) |                        |  | Cognos Desktop OEM Agreement by and between the Company and
	Cognos Corporation dated as of February 28, 1994, as
	amended.                                                                                                                   
|            | *10.7(5) |                        |  | Micro Focus OSX Application Vendor License Agreement by and
	between the Company and Micro Focus Incorporated dated as of
	June 10, 1993, as amended.                                                                                         
|            | 10.8(3)  |                        |  | Agreement of Lease by and between the Company and Tysons Corner
	Limited Partnership, dated as of November 12, 1991, as
	amended.                                                                                                             
|            | 10.9(3)  |                        |  | Agreement of Lease by and between the Company and Tysons Corner
	Limited Partnership, dated as of November 12, 1992, as
	amended.                                                                                                             
|            | 10.10(4) |                        |  | Form of Indemnity Agreement for officers and directors.                                                                                                                                                                                       
|            | 10.11(4) |                        |  | Form of Tax Indemnification Agreement.                                                                                                                                                                                                        
|            | 10.12(4) |                        |  | Seventh Amendment to Agreements of Lease by and between the
	Company and Tysons Corner Limited Partnership, dated as of
	December 17, 1997.                                                                                                   
|            | 21(6)    |                        |  | Subsidiaries of the Company.                                                                                                                                                                                                                  
|            | 23.1     |                        |  | Consent of Arthur Andersen LLP.                                                                                                                                                                                                               
|            | 27.1     |                        |  | Financial Data Schedule.                                                                                                                                                                                                                      




| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | This Exhibit has been filed separately with the Commission
	pursuant to an application for confidential treatment. The
	confidential portions of this Exhibit have been omitted and are
	marked by an asterisk.



|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the Companys Current Report on
	 Form 8-K filed on May 13, 1998 (File
	No. 000-22001).      
|   
|(2) | Incorporated by reference to the Companys Current Report on
	 Form 8-K filed on June 12, 1998 (File
	No. 000-22001).     
|   
|(3) | Incorporated by reference to the Companys Form S-1
	filed on December 19, 1996 (File No. 333-18247).                     
|   
|(4) | Incorporated by reference to the Companys Amendment
	No. 1 to Form S-1 filed on January 28, 1997 (File
	No. 333-18247).  
|   
|(5) | Incorporated by reference to the Companys Amendment
	No. 2 to Form S-1 filed on February 24, 1997 (File
	 No. 333-18247).

(b)  Reports on Form 8-K



|    |                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Incorporated by reference to the Companys Annual Report on
	Form 10-K for the fiscal year ended December 31, 1998
	(File No.  000-22001).

No reports on Form 8-K were filed during the last quarter of
 the period covered by this report.

29



---



##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                     
| | --------------------
| | DELTEK SYSTEMS, INC.
| | (Registrant)        

March 29, 2000

| |     |                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------
| | By: | /s/ KENNETH E. DELASKI 
	 _______________________________________ 
	 Kenneth E. deLaski, Chief Executive Officer



| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of the Securities Exchange Act of
	1934, this report has been signed below by the following persons
	on behalf of the registrant and in the capacities and on the
	dates indicated.

|               |  |                                                                                                                                                
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|March 29, 2000 |  | /s/ KENNETH E. DELASKI
	----------------------------------------------
	Kenneth E. deLaski, President, Chief
	Executive Officer, and Director  
|              
|March 29, 2000 |  | /s/ DONALD DELASKI
	----------------------------------------------
	Donald deLaski, Chairman of the Board                                      
|              
|March 29, 2000 |  | /s/ DAVID L. SPILMAN
	----------------------------------------------
	David L. Spilman, Chief Financial Officer
	(Principal Accounting Officer)
|              
|March 29, 2000 |  | /s/ DARRELL J. OYER
	----------------------------------------------
	Darrell J. Oyer, Director                                                 
|              
|March 29, 2000 |  | /s/ CHARLES W. STEIN
	----------------------------------------------
	Charles W. Stein, Director                                               
|              
|March 29, 2000 |  | /s/ ROBERT E. GREGG
	----------------------------------------------
	Robert E. Gregg, Director                                                 

30



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##### Table of Contents



DELTEK SYSTEMS, INC.

FINANCIAL STATEMENTS

As of December 31, 1998 and 1999


Together With Report of Independent Public Accountants


F-1



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Deltek Systems, Inc.:

We have audited the accompanying consolidated balance sheets of
Deltek Systems, Inc. (a Virginia corporation) and subsidiaries,
as of December 31, 1998 and 1999, and the related
consolidated statements of operations, changes in
shareholders equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial
 statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Deltek Systems, Inc. and subsidiaries, as of December 31,
 1998 and 1999 and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

/s/ Arthur Andersen LLP

Vienna, Virginia



F-2



---



##### Table of Contents



DELTEK SYSTEMS, INC.

TABLE OF CONTENTS

|                                                                                                                 |  |      |      | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                 |  | Page
|                                                                                                                 |  |     
|Consolidated Balance SheetsAs of December 31, 1998 and 1999                                                      |  |      | F-4  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of OperationsFor the Years Ended December 31, 1997, 1998, and 1999                       |  |      | F-5  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of Changes in Shareholders
	EquityFor the Years Ended December 31, 1997, 1998, and 1999 |  |      | F-6  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of Cash FlowsFor The Years Ended December 31, 1997, 1998, and 1999                       |  |      | F-7  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Notes to Consolidated Financial StatementsAs of December 31, 1998 and 1999                                       |  |      | F-8  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Valuation and Qualifying AccountsFor the Years Ended December 31, 1997, 1998, and 1999                           |  |      | F-19 | 

F-3



---



##### Table of Contents



DELTEK SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

As of December 31, 1998 and 1999


(In Thousands, Except Share Data)


|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |        |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                                                                                                                  |                                                                                                                                                                     | 1998                                       |        | 1999  
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Assets                                                                                                                                           
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Current assets:                                                                                                                                   |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Cash and cash equivalents                                                                                                                                           |                                            | $      | 9,515  |        |  | $      | 5,989  |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Marketable securities                                                                                                                                               |                                            |        | 23,861 |        |  |        | 23,256 |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Accounts receivable, net of allowance for doubtful accounts of
	$689 and $1,404, respectively                                                                       |                                            |        | 11,754 |        |  |        | 13,427 |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Deferred income taxes                                                                                                                                               |                                            |        | 1,678  |        |  |        | 842    |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Prepaid expenses and other current assets                                                                                                                           |                                            |        | 2,159  |        |  |        | 3,853  |       
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                  |                                                                                                                                                                     | Total current assets                       |        |        | 48,967 |  |        |        | 47,367 | 
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|Furniture, equipment, and leasehold improvements, at cost, net
	 of accumulated depreciation and amortization of $6,556 and
	$8,289, respectively |                                                                                                                                                                     |                                            | 4,312  |        |        |  | 6,516  |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Computer software development costs, at cost, net of
	accumulated amortization of $2,239 and $3,166, respectively                                 |                                                                                                                                                                     |                                            | 3,025  |        |        |  | 5,129  |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Purchased intangibles, net                                                                                                                        |                                                                                                                                                                     |                                            | 4,349  |        |        |  | 3,298  |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Other assets                                                                                                                                      |                                                                                                                                                                     |                                            | 58     |        |        |  | 125    |       
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                  |                                                                                                                                                                     | Total assets                               |        | $      | 60,711 |  |        | $      | 62,435 | 
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Liabilities and Shareholders Equity                                                                                                             
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Current liabilities:                                                                                                                              |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Accounts payable and accrued expenses                                                                                                                               |                                            | $      | 7,711  |        |  | $      | 6,567  |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Deferred revenue                                                                                                                                                    |                                            |        | 11,594 |        |  |        | 8,626  |       
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                  |                                                                                                                                                                     | Total current liabilities                  |        |        | 19,305 |  |        |        | 15,193 | 
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|Commitments and contingencies (Note 8)                                                                                                            |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Shareholders equity:                                                                                                                             |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Preferred stock, $0.001 par value per share; 2,000,000 shares
	authorized; none issued or outstanding                                                               |                                            |        |       |        |  |        |       |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                  | Common stock, $0.001 par value; 45,000,000 shares authorized;
	17,854,151 and 16,636,197 shares issued and outstanding at
	December 31, 1998 and 1999, respectively |                                            |        | 18     |        |  |        | 17     |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Paid-in capital                                                                                                                                   |                                                                                                                                                                     |                                            | 21,568 |        |        |  | 10,023 |       
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|                                                                                                                                                 
|Retained earnings                                                                                                                                 |                                                                                                                                                                     |                                            | 19,990 |        |        |  | 37,202 |       
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|Less  Unearned compensation                                                                                                                      |                                                                                                                                                                     |                                            | (170   | )      |        |  |       |       
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                  |                                                                                                                                                                     | Total shareholders equity                 |        |        | 41,406 |  |        |        | 47,242 | 
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       
|                                                                                                                                                  |                                                                                                                                                                     | Total liabilities and shareholders equity |        | $      | 60,711 |  |        | $      | 62,435 | 
|                                                                                                                                                  |                                                                                                                                                                     |                                            |        |        |        |  |        |       

The accompanying notes are an integral part of these consolidated
 balance sheets.

F-4



---



##### Table of Contents



DELTEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 1997, 1998, and 1999


(In Thousands, Except Per Share Data)


|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |        |        | 
|--------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------ | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                                  |                                                       | 1997                     |        | 1998   |        | 1999
|                                                                                  |                                                       |                          |        |        |        |     
|Revenues:                                                                         |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | License fees                                          |                          | $      | 21,043 |        |      | $      | 28,162 |        |   | $      | 29,836 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Services                                              |                          |        | 33,216 |        |      |        | 50,867 |        |   |        | 65,321 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Third-party equipment and software                    |                          |        | 3,387  |        |      |        | 4,040  |        |   |        | 3,087  |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                  |                                                       | Total revenues           |        |        | 57,646 |      |        |        | 83,069 |   |        |        | 98,244 | 
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Operating expenses:                                                               |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cost of software                                      |                          |        | 2,053  |        |      |        | 2,491  |        |   |        | 2,583  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cost of services                                      |                          |        | 14,375 |        |      |        | 24,763 |        |   |        | 30,849 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cost of third-party equipment and software            |                          |        | 2,631  |        |      |        | 3,146  |        |   |        | 2,640  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Software development                                  |                          |        | 11,214 |        |      |        | 15,014 |        |   |        | 16,663 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Sales and marketing                                   |                          |        | 6,643  |        |      |        | 10,353 |        |   |        | 11,592 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | General and administrative                            |                          |        | 3,558  |        |      |        | 4,163  |        |   |        | 5,939  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Amortization of purchased intangibles                 |                          |        | 26     |        |      |        | 687    |        |   |        | 1,051  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Acquisition and offering costs                        |                          |        | 320    |        |      |        | 1,475  |        |   |        |       |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Purchased in-process research and development         |                          |        |       |        |      |        | 2,500  |        |   |        |       |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                  |                                                       | Total operating expenses |        |        | 40,820 |      |        |        | 64,592 |   |        |        | 71,317 | 
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Income from operations                                                            |                                                       |                          | 16,826 |        |        |      | 18,477 |        |        |   | 26,927 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Interest income                                                                   |                                                       |                          | 781    |        |        |      | 1,066  |        |        |   | 1,166  |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Income before income taxes                                                        |                                                       |                          | 17,607 |        |        |      | 19,543 |        |        |   | 28,093 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Provision for income taxes                                                        |                                                       |                          | 5,898  |        |        |      | 7,788  |        |        |   | 10,881 |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Net income                                                                        |                                                       | $                        | 11,709 |        |        | $    | 11,755 |        |        | $ | 17,212 |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Basic net income per share                                                        |                                                       | $                        | 0.67   |        |        | $    | 0.66   |        |        | $ | 1.00   |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Diluted net income per share                                                      |                                                       | $                        | 0.65   |        |        | $    | 0.64   |        |        | $ | 0.97   |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Weighted-average shares outstanding                                               |                                                       |                          | 17,398 |        |        |      | 17,814 |        |        |   | 17,284 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Weighted-average shares outstanding, including dilutive effect
	 of stock options |                                                       |                          | 17,882 |        |        |      | 18,235 |        |        |   | 17,732 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Pro forma statement of operations data (unaudited):                               |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Income before provision for income taxes, as reported |                          | $      | 17,607 |        |      |        |        |        |   |        |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Income tax provision                                  |                          |        | 6,780  |        |      |        |        |        |   |        |        |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Net income                                                                        |                                                       | $                        | 10,827 |        |        |      |        |        |        |   |        |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Pro forma basic net income per share                                              |                                                       | $                        | 0.62   |        |        |      |        |        |        |   |        |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       
|Pro forma diluted net income per share                                            |                                                       | $                        | 0.61   |        |        |      |        |        |        |   |        |       
|                                                                                  |                                                       |                          |        |        |        |      |        |        |        |   |        |       

The accompanying notes are an integral part of these consolidated
 statements.

F-5



---



##### Table of Contents



DELTEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY

For the Years Ended December 31, 1997, 1998, and 1999


(In Thousands, Except Share Data)


|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |               |   |   |        |         |   |   |      |     |  |   |        |         |  
|-------------------------- | ---------------------------------------------------------------------------- | ------------ | ---------- | ---------- | - | ------- | -- | -------- | - | ------------ | ------ | ------------- | - | - | ------ | ------- | - | - | ---- | --- |  | - | ------ | ------- | -
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        | Total        
|                           |                                                                              | Common       |            | Par        |   | Paid-In |    | Retained |   | Unearned     |        | Shareholders
|                           |                                                                              | Stock Shares |            | Value      |   | Capital |    | Earnings |   | Compensation |        | Equity       
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |              
|Balance, December 31, 1996 |                                                                              |              | 15,877,167 |            |   | $       | 16 |          |   | $            | 2,351  |               |   | $ | 10,586 |         |   | $ | (720 | )   |  | $ | 12,233 |        
|                          
|                          
|                          
|                          
|                           | Cash dividends                                                               |              |            |           |   |         |    |         |   |              |        |              |   |   |        | (13,614 | ) |   |      |    |  |   |        | (13,614 | )
|                          
|                          
|                          
|                          
|                           | Accrued dividends payable                                                    |              |            |           |   |         |    |         |   |              |        |              |   |   |        | (400    | ) |   |      |    |  |   |        | (400    | )
|                          
|                          
|                          
|                          
|                           | Net proceeds from initial public offering                                    |              |            | 1,700,000  |   |         |    | 2        |   |              |        | 16,386        |   |   |        |        |   |   |      |    |  |   |        | 16,388  |  
|                          
|                          
|                          
|                          
|                           | Exercise of stock options                                                    |              |            | 202,717    |   |         |    |         |   |              |        | 250           |   |   |        |        |   |   |      |    |  |   |        | 250     |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for Employee Stock Purchase Plan                          |              |            | 29,195     |   |         |    |         |   |              |        | 273           |   |   |        |        |   |   |      |    |  |   |        | 273     |  
|                          
|                          
|                          
|                          
|                           | Purchase and retirement of common stock from ESOP                            |              |            | (24,146    | ) |         |    |         |   |              |        | (5            | ) |   |        | (77     | ) |   |      |    |  |   |        | (82     | )
|                          
|                          
|                          
|                          
|                           | Purchase and retirement of common Stock                                      |              |            | (80,000    | ) |         |    |         |   |              |        | (1,211        | ) |   |        |        |   |   |      |    |  |   |        | (1,211  | )
|                          
|                          
|                          
|                          
|                           | Amortization of unearned compensation                                        |              |            |           |   |         |    |         |   |              |        |              |   |   |        |        |   |   |      | 268 |  |   |        | 268     |  
|                          
|                          
|                          
|                          
|Net income                 |                                                                              |              |           |            |   |         |   |          |   |              |       |               |   |   | 11,709 |         |   |   |     |     |  |   | 11,709 |        
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |               |   |   |        |         |   |   |      |     |  |   |        |        
|Balance, December 31, 1997 |                                                                              |              | 17,704,933 |            |   |         | 18 |          |   |              | 18,044 |               |   |   | 8,204  |         |   |   | (452 | )   |  |   | 25,814 |        
|                          
|                          
|                          
|                          
|                           | Reversed dividend accrual                                                    |              |            |           |   |         |    |         |   |              |        |              |   |   |        | 31      |   |   |      |    |  |   |        | 31      |  
|                          
|                          
|                          
|                          
|                           | Exercise of stock options                                                    |              |            | 160,261    |   |         |    |         |   |              |        | 431           |   |   |        |        |   |   |      |    |  |   |        | 431     |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for Employee Stock Purchase Plan                          |              |            | 38,957     |   |         |    |         |   |              |        | 620           |   |   |        |        |   |   |      |    |  |   |        | 620     |  
|                          
|                          
|                          
|                          
|                           | Purchase and retirement of common stock                                      |              |            | (50,000    | ) |         |    |         |   |              |        | (806          | ) |   |        |        |   |   |      |    |  |   |        | (806    | )
|                          
|                          
|                          
|                          
|                           | Tax benefit of options exercised                                             |              |            |           |   |         |    |         |   |              |        | 2,097         |   |   |        |        |   |   |      |    |  |   |        | 2,097   |  
|                          
|                          
|                          
|                          
|                           | Issuance of stock warrants for acquisition of SalesKit Software
	Corporation |              |            |           |   |         |    |         |   |              |        | 932           |   |   |        |        |   |   |      |    |  |   |        | 932     |  
|                          
|                          
|                          
|                          
|                           | Shareholder contribution                                                     |              |            |           |   |         |    |         |   |              |        | 250           |   |   |        |        |   |   |      |    |  |   |        | 250     |  
|                          
|                          
|                          
|                          
|                           | Amortization of unearned compensation                                        |              |            |           |   |         |    |         |   |              |        |              |   |   |        |        |   |   |      | 282 |  |   |        | 282     |  
|                          
|                          
|                          
|                          
|Net income                 |                                                                              |              |           |            |   |         |   |          |   |              |       |               |   |   | 11,755 |         |   |   |     |     |  |   | 11,755 |        
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |               |   |   |        |         |   |   |      |     |  |   |        |        
|Balance, December 31, 1998 |                                                                              |              | 17,854,151 |            |   | $       | 18 |          |   |              | 21,568 |               |   |   | 19,990 |         |   |   | (170 | )   |  |   | 41,406 |        
|                          
|                          
|                          
|                          
|                           | Exercise of stock options                                                    |              |            | 134,680    |   |         |    |         |   |              |        | 497           |   |   |        |        |   |   |      |    |  |   |        | 497     |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for Employee Stock Purchase Plan                          |              |            | 49,866     |   |         |    |         |   |              |        | 689           |   |   |        |        |   |   |      |    |  |   |        | 689     |  
|                          
|                          
|                          
|                          
|                           | Purchase and retirement of common stock                                      |              |            | (1,402,500 | ) |         |    | (1       | ) |              |        | (13,247       | ) |   |        |        |   |   |      |    |  |   |        | (13,248 | )
|                          
|                          
|                          
|                          
|                           | Tax benefit of options exercised                                             |              |            |           |   |         |    |          |   |              |        | 516           |   |   |        |        |   |   |      |    |  |   |        | 516     |  
|                          
|                          
|                          
|                          
|                           | Amortization of unearned compensation                                        |              |            |           |   |         |    |         |   |              |        |              |   |   |        |        |   |   |      | 170 |  |   |        | 170     |  
|                          
|                          
|                          
|                          
|Net income                 |                                                                              |              |           |            |   |         |   |          |   |              |       |               |   |   | 17,212 |         |   |   |     |     |  |   | 17,212 |        
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |               |   |   |        |         |   |   |      |     |  |   |        |        
|Balance, December 31, 1999 |                                                                              |              | 16,636,197 |            |   | $       | 17 |          |   | $            | 10,023 |               |   | $ | 37,202 |         |   | $ |     |     |  | $ | 47,242 |        
|                           |                                                                              |              |            |            |   |         |    |          |   |              |        |               |   |   |        |         |   |   |      |     |  |   |        |        

The accompanying notes are an integral part of these consolidated
 statements.

F-6



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##### Table of Contents



DELTEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31, 1997, 1998, and 1999


(In Thousands)


|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |         |        |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------- | ------ | -
|                                                     |                                                                                     | 1997                                                |         | 1998    |        | 1999
|                                                     |                                                                                     |                                                     |         |         |        |     
|Cash flows from operating activities:                |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                          |                                                     | $       | 11,709  |        |      | $       | 11,755 |        |   | $       | 17,212  |       
|                                                     | Adjustments to reconcile net income to net cash provided by
	operating activities  |                                                     |         |         |        |      |         |        |        |   |         |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Depreciation and amortization                       |         |         | 1,548  |      |         |        | 2,787  |   |         |         | 3,711  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Other noncash charges                               |         |         | 268    |      |         |        | 1,575  |   |         |         | 170    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Purchased research and development                  |         |         |       |      |         |        | 2,500  |   |         |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Accreted interest on marketable securities          |         |         | (186   | )    |         |        | (34    | ) |         |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in accounts receivable, net                  |         |         | (1,233 | )    |         |        | (5,295 | ) |         |         | (1,673 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in prepaid expenses and other current assets |         |         | 83     |      |         |        | (523   | ) |         |         | (1,245 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in accounts payable and accrued expenses     |         |         | 2,305  |      |         |        | 2,258  |   |         |         | (1,144 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in income taxes payable                      |         |         | 543    |      |         |        | (543   | ) |         |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in deferred income taxes, net                |         |         | 159    |      |         |        | (961   | ) |         |         | 836    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Change in deferred revenue                          |         |         | 1,400  |      |         |        | 3,988  |   |         |         | (2,968 | )
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Net cash provided by operating activities            |                                                                                     |                                                     | 16,596  |         |        |      | 17,507  |        |        |   | 14,899  |        
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Cash flows from investing activities:                |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | (Purchase) sale of marketable securities                                            |                                                     |         | (14,763 | )      |      |         | (8,878 | )      |   |         | 605     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of property and equipment                                                  |                                                     |         | (1,656  | )      |      |         | (2,543 | )      |   |         | (3,937  | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisition of SalesKit Software Corporation                                        |                                                     |         |        |        |      |         | (6,054 | )      |   |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capitalization of computer software development costs                               |                                                     |         | (679    | )      |      |         | (1,276 | )      |   |         | (3,031  | )     
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Net cash used in investing activities                |                                                                                     |                                                     | (17,098 | )       |        |      | (18,751 | )      |        |   | (6,363  | )      
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Cash flows from financing activities:                |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash proceeds from initial public offering, net of offering costs                   |                                                     |         | 16,388  |        |      |         |       |        |   |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash dividends paid to stockholders                                                 |                                                     |         | (13,614 | )      |      |         | (369   | )      |   |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash proceeds from exercise of stock options                                        |                                                     |         | 250     |        |      |         | 431    |        |   |         | 497     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash proceeds from issuance of stock for employee Purchase plan                     |                                                     |         | 273     |        |      |         | 620    |        |   |         | 689     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Common stock purchased and retired                                                  |                                                     |         | (1,293  | )      |      |         | (806   | )      |   |         | (13,248 | )     
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Net cash provided by (used in) financing activities  |                                                                                     |                                                     | 2,004   |         |        |      | (124    | )      |        |   | (12,062 | )      
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Net increase (decrease) in cash and cash equivalents |                                                                                     |                                                     | 1,502   |         |        |      | (1,368  | )      |        |   | (3,526  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of year         |                                                                                     |                                                     | 9,381   |         |        |      | 10,883  |        |        |   | 9,515   |        
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Cash and cash equivalents, end of year               |                                                                                     | $                                                   | 10,883  |         |        | $    | 9,515   |        |        | $ | 5,989   |        
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        
|Cash paid during the year for income taxes           |                                                                                     | $                                                   | 5,157   |         |        | $    | 8,307   |        |        | $ | 11,231  |        
|                                                     |                                                                                     |                                                     |         |         |        |      |         |        |        |   |         |        

The accompanying notes are an integral part of these consolidated
 statements.

F-7



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##### Table of Contents



DELTEK SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 1998 and 1999


1.  Organization and Summary of Significant
Accounting Policies:

Deltek is incorporated under the laws of the Commonwealth of
Virginia. The Company designs, develops, sells and supports a
family of integrated software that provide project-oriented
businesses with tools to more effectively manage, operate and
grow their operations. The Companys software products have
been specifically designed to fulfill the needs of
project-oriented companies and include both enterprise-wide
systems as well as application software products that can be used
 either as a stand alone application or as an integrated part of
the Companys enterprise-wide systems. Delteks
enterprise-wide products consist of Costpoint, an advanced
client/ server business software system designed for all types of
 project-oriented organizations; Advantage, an integrated,
project-focused accounting system designed for professional
service firms; GCS Premier, a windows based solution for small to
 mid-sized businesses earning revenue from government contracts;
System1, a character-based accounting system designed primarily
for organizations providing products or services under contracts
with the federal government; and CFMS, a family of
older-generation project-based accounting systems used primarily
by architecture and engineering firms. Delteks stand-alone
application software product, ET Enterprise, an advanced employee
 timekeeping system, can be integrated with the Companys
enterprise-wide systems.

Consolidation Policy

The accompanying consolidated financial statements are prepared
in accordance with generally accepted accounting principles and
include the accounts of the Company and its subsidiaries, all of
which are wholly owned. All significant intercompany accounts and
 transactions have been eliminated in consolidation.

Net Income Per Common Share

The calculation of basic net income per share is based on the
weighted-average number of Company shares outstanding in each
period. Diluted net income per share is based on the combined
weighted-average number of shares and share equivalents
outstanding, assuming dilution as calculated under the treasury
stock method. No reconciling items exist between the net income
used for basic and diluted net income per share. The only
reconciling item between the shares used for basic and diluted
net income per share relates to outstanding stock options.

Pro forma net income is based on the assumption that the
Companys S Corporation status was terminated at the
beginning of 1997.

Managements Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
 liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

The Companys estimates of anticipated gross revenues,
working capital, and the remaining estimated lives of tangible
and intangible assets, or both, could be reduced significantly in
 the future due to changes in technology, regulation, available
financing, or competitive pressures.

Revenue Recognition

The Company recognizes software revenue in accordance with
Statement of Position 97-2 Software Revenue
Recognition, and Statement of Position 98-9
Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions.

F-8



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company grants perpetual licenses under a standard license
agreement. For certain of its software products, the Company
typically grants its customers a right of return for a full or
partial refund of the license fee during a refund period which is
 generally 60 to 90 days from the date of the initial
software delivery, although the Company occasionally has
provided, and may in the future provide, longer refund periods
for larger, more complex Costpoint installations. The Company
generally recognizes license fees from its System1, ET Enterprise
 and Advantage products upon delivery, whereas Costpoint license
fees are recognized upon the expiration of the applicable refund
period and are recorded as deferred revenue until recognized
(Note 6). For contracts that involve significant installment
 payments, the Company also evaluates whether fees are fixed and
determinable. If the fees are not fixed and determinable, the
Company defers the recognition of revenue until the payments
become due. Implementation and other consulting services are
provided on a time and materials basis billed monthly and
recognized as the services are performed. Telephone support and
periodic enhancements and updates are provided for maintenance
fees that are payable quarterly and initially represent between
15 percent and 20 percent of the related software
license fee on an annual basis. Revenue from quarterly
maintenance and support service is recognized over the term of
the support agreement. Revenue from third-party equipment and
software is derived from the resale and sublicensing of
third-party hardware and software products in connection with the
 license and installation of the Companys systems and is
generally recognized upon delivery.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.

Marketable Securities

The Company accounts for its debt and equity securities under
SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. At acquisition, debt and equity
 securities are classified into three categories:
held-to-maturity, available-for-sale, or trading. At each
reporting date, the appropriateness of the classifications is
reassessed.

Included in the balance sheet at December 31, 1998 and 1999
are marketable securities of $23,861,000 and $23,256,000,
respectively, that consist of investments in municipal bonds,
money market accounts and floating rate bonds and are classified
as available-for-sale and recorded at fair value. No material
unrealized gains or losses were incurred in the years presented.

Furniture, Equipment and Leasehold Improvements

Furniture and equipment are stated at cost and are depreciated
using the straight-line method over the estimated useful lives of
 the assets, which are generally three to five years. Leasehold
improvements are amortized over the shorter of the useful life of
 the asset or the lease term.

Capitalized Computer Software Development Costs

Computer software development costs for products are capitalized
subsequent to the establishment of technological feasibility, as
evidenced by detailed program designs. Capitalization ceases when
 the products are available for general release to customers, at
which time amortization of the capitalized costs begins on a
straight-line basis over the estimated lives of the products,
which are generally five years. Amortization expense of
approximately $698,000, $876,000, and $927,000 was recorded
related to these costs during 1997, 1998, and 1999, respectively,
 and is included in cost of software.

F-9



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash and cash equivalents, marketable securities, and accounts
receivable. The Company maintains cash and cash equivalents with
high credit quality financial institutions. Marketable securities
 consist primarily of investments in municipal bonds, money
market accounts and floating rate bonds with original maturities
at date of purchase beyond three months. The credit risk with
respect to accounts receivable is generally diversified due to
the large number of entities comprising the Companys
customer base. The Company performs ongoing credit evaluations of
 its customers financial condition and maintains allowances
 for potential credit losses. Actual losses and allowances have
been within managements expectations.

Fair Value of Financial Instruments

Financial instruments are defined as cash, evidence of an
ownership interest in an entity, or a contract that imposes an
obligation to deliver cash or other financial instruments to a
second party. The carrying amounts of accounts receivable and
accounts payable in the accompanying financial statements
approximate fair value due to the short maturity of these
instruments.

Income Taxes

Prior to February 1997, the majority of the Companys
operations had elected to be treated as an S Corporation for
 federal income tax purposes. Accordingly, income or loss was
prorated among the stockholders and reported on their individual
income tax returns. Upon Delteks initial public offering,
the entire Company became a C Corporation for federal and
state income tax purposes.

Income taxes are accounted for in accordance with SFAS
No. 109, Accounting for Income Taxes. Under SFAS
 No. 109, deferred tax assets and liabilities are computed
based on the difference between the financial statement and tax
basis of assets and liabilities and are measured by applying
enacted tax rates and laws for the taxable years in which those
differences are expected to reverse.

Purchased Intangibles

The value of intangible assets acquired primarily relates to
purchased technology that has reached technological feasibility.
Purchased intangibles are being amortized over three to five
years.

Impairment of Long-Lived Assets

The Company complies with SFAS No. 121, Accounting for
 the Impairment of Long-Lived Assets and for Long-Lived Assets to
 Be Disposed Of . The Company reviews its long-lived
assets, including software development costs; property, plant,
and equipment; identifiable intangibles; and goodwill, for
impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived
assets, the Company evaluates the probability that future
undiscounted net cash flows, without interest charges, will be
less than the carrying amount of the assets. Impairment is
measured at fair value.

Accounting Pronouncements Not Yet Effective

In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133). The Company
must adopt this statement no later than January 1, 2001.
SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the
balance sheet as either an

F-10



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

asset or liability measured at its fair value. The Company does
not expect SFAS No. 133 to materially impact its financial
condition or results of operations.

Reclassifications

Certain amounts in prior years financial statements have
been reclassified to conform to the 1999 presentation.

2.  Harper and Shuman and SalesKit Business
Combinations:

Harper and Shuman Business Combination

In May 1998, Deltek Systems, Inc. completed its business
combination with Harper and Shuman, Inc. (H&S) by
 exchanging 686,000 shares of its common stock for all of the
common stock of H&S. Each share of H&S was exchanged for
5.64 shares of Deltek Systems, Inc. common stock. In addition,
outstanding H&S stock options were converted at the same
exchange factor into options to purchase approximately 4,000
shares of Deltek Systems, Inc. common stock.

The acquisition constituted a tax-free reorganization and has
been accounted for as a pooling-of-interests under Accounting
Principles Board Opinion No. 16. Accordingly, all prior
period consolidated financial statements presented have been
restated to include the combined results of operations, financial
 position and cash flows as though H&S had always been a part
 of Deltek Systems, Inc. (hereafter H&S and Deltek Systems,
Inc. are collectively referred to as the Company or
Deltek).

SalesKit Acquisition

In April 1998, the Company acquired substantially all of the
 assets of SalesKit Software Corporation (SalesKit),
and assumed certain related liabilities. The purchase price
consisted of cash of $6,054,000 and warrants with an estimated
fair value of $932,000. The warrants allow the holder to purchase
 130,000 shares of Deltek common stock at an exercise price of
$22 per share, exercisable over a three-year period.

The Company assigned $4,310,000 of the purchase price to
intangible assets and existing technology and is amortizing this
amount over five years. Based on the stage of
completion valuation method, the Company assigned
$2,500,000 to in-process research and development and expensed
this amount in 1998. In the opinion of management, the acquired
in-process research and development had not yet reached
technological feasibility and had no alternative future uses. At
closing, the Company recorded approximately $468,000 in assumed
liabilities of SalesKit, primarily related to accrued liabilities
 and deferred revenue.

3.  Accounts Receivable:

The Company periodically licenses its software to certain
customers under monthly installment plans. Installment plans
extending longer than four months are generally interest bearing.

4.  Accounts Payable and Accrued Expenses:

Accounts payable and accrued expenses consist of the following
(in thousands):

|                                            |  |             |       |      |  |   |       | 
|------------------------------------------- |  | ----------- | ----- | ---- |  | - | ----- | 
|                                            |  |            
|                                            |  | December 31
|                                            |  |            
|                                            |  | 1998        |       | 1999
|                                            |  |             |       |     
|Accrued wages and other employee benefits   |  | $           | 4,291 |      |  | $ | 3,462 | 
|                                           
|                                           
|                                           
|                                           
|Deferred rent credits                       |  |             | 315   |      |  |   | 125   | 
|                                           
|                                           
|                                           
|                                           
|Accounts payable and other accrued expenses |  |             | 3,105 |      |  |   | 2,980 | 
|                                            |  |             |       |      |  |   |       | 
|                                            |  | $           | 7,711 |      |  | $ | 6,567 | 
|                                            |  |             |       |      |  |   |       | 

F-11



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

5.  Income Taxes:

In conjunction with Delteks initial public offering in
February 1997, the Company (prior to the combination of
H&S) changed from an S Corporation to a
C Corporation for federal and state income tax purposes.
H&S reported as a C Corporation for all years presented. The
provision for income taxes is summarized as follows (in
thousands):

|              |         |      |       |       |  |      |        |        |   |   |        |       | 
|------------- | ------- | ---- | ----- | ----- |  | ---- | ------ | ------ | - | - | ------ | ----- | 
|              |         | 1997 |       | 1998  |  | 1999
|              |         |      |       |       |  |     
|Current:      |         |      |       |       |  |      |        |        |   |   |        |      
|             
|             
|             
|             
|              | Federal |      | $     | 4,919 |  |      | $      | 7,958  |   |   | $      | 8,334 | 
|             
|             
|             
|             
|              | State   |      |       | 821   |  |      |        | 1,573  |   |   |        | 1,711 | 
|              |         |      |       |       |  |      |        |        |   |   |        |      
|              |         |      | 5,740 |       |  |      | 9,531  |        |   |   | 10,045 |      
|              |         |      |       |       |  |      |        |        |   |   |        |      
|Deferred:     |         |      |       |       |  |      |        |        |   |   |        |      
|             
|             
|             
|             
|              | Federal |      |       | 136   |  |      |        | (1,525 | ) |   |        | 694   | 
|             
|             
|             
|             
|              | State   |      |       | 22    |  |      |        | (218   | ) |   |        | 142   | 
|              |         |      |       |       |  |      |        |        |   |   |        |      
|              |         |      | 158   |       |  |      | (1,743 | )      |   |   | 836    |      
|              |         |      |       |       |  |      |        |        |   |   |        |      
|Tax provision |         | $    | 5,898 |       |  | $    | 7,788  |        |   | $ | 10,881 |      
|              |         |      |       |       |  |      |        |        |   |   |        |      

The income tax provision for continuing operations differs from
that computed using the statutory federal income tax rate of
35 percent in 1998 and 1997 for the following reasons:

|                                               |  |      |       |      |  |      |       |   |  |   |        |  
|---------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                               |  | 1997 |       | 1998 |  | 1999
|                                               |  |      |       |      |  |     
|Computed Statutory Amount                      |  | $    | 6,162 |      |  | $    | 6,840 |   |  | $ | 9,833  |  
|                                              
|                                              
|                                              
|                                              
|Tax Exempt Income                              |  |      | (187  | )    |  |      | (327  | ) |  |   | (340   | )
|                                              
|                                              
|                                              
|                                              
|State Income Taxes, net of federal tax benefit |  |      | 534   |      |  |      | 880   |   |  |   | 1,278  |  
|                                              
|                                              
|                                              
|                                              
|Non-taxable income during S Corporation Status |  |      | (644  | )    |  |      |      |   |  |   |       |  
|                                              
|                                              
|                                              
|                                              
|Non-deductible acquisition costs               |  |      |      |      |  |      | 388   |   |  |   |       |  
|                                              
|                                              
|                                              
|                                              
|Other                                          |  |      | 33    |      |  |      | 7     |   |  |   | 110    |  
|                                               |  |      |       |      |  |      |       |   |  |   |        |  
|                                               |  | $    | 5,898 |      |  | $    | 7,788 |   |  | $ | 10,881 |  
|                                               |  |      |       |      |  |      |       |   |  |   |        |  

F-12



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table is a summary of the significant components of
 the Companys deferred tax assets and liabilities for 1998
and 1999.

|                                   |                                                 |             |        |        |   |   |        |        |  
|---------------------------------- | ----------------------------------------------- | ----------- | ------ | ------ | - | - | ------ | ------ | -
|                                   |                                                 |            
|                                   |                                                 | December 31
|                                   |                                                 |            
|                                   |                                                 | 1998        |        | 1999  
|                                   |                                                 |             |        |       
|Deferred tax assets:               |                                                 |             |        |        |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Cash to accrual change in tax accounting method |             | $      | 132    |   |   | $      | 65     |  
|                                  
|                                  
|                                  
|                                  
|                                   | Employee compensation & benefits                |             |        | 456    |   |   |        | 579    |  
|                                  
|                                  
|                                  
|                                  
|                                   | Reserves and other liabilities                  |             |        | 914    |   |   |        | 634    |  
|                                  
|                                  
|                                  
|                                  
|                                   | Noncash compensation                           |             |        | 282    |   |   |        | 346    |  
|                                  
|                                  
|                                  
|                                  
|                                   | Purchased Intangibles                           |             |        | 1,148  |   |   |        | 1,331  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Other                                           |             |        | 121    |   |   |        | 308    |  
|                                   |                                                 |             |        |        |   |   |        |       
|Total deferred tax assets          |                                                 |             | 3,053  |        |   |   | 3,263  |       
|                                   |                                                 |             |        |        |   |   |        |       
|Deferred tax liabilities:          |                                                 |             |        |        |   |   |        |       
|                                  
|                                  
|                                  
|                                  
|                                   | Depreciation                                    |             |        | (259   | ) |   |        | (363   | )
|                                  
|                                  
|                                  
|                                  
|                                   | Computer software development costs             |             |        | (1,100 | ) |   |        | (2,030 | )
|                                  
|                                  
|                                  
|                                  
|                                   | Other                                           |             |        | (16    | ) |   |        | (28    | )
|                                   |                                                 |             |        |        |   |   |        |       
|Total deferred tax liabilities     |                                                 |             | (1,375 | )      |   |   | (2,421 | )     
|                                   |                                                 |             |        |        |   |   |        |       
|Valuation reserve                  |                                                 |             |       |        |   |   |       |       
|                                   |                                                 |             |        |        |   |   |        |       
|Net deferred tax asset (liability) |                                                 | $           | 1,678  |        |   | $ | 842    |       
|                                   |                                                 |             |        |        |   |   |        |       

6. Deferred Revenue:

The Company had deferred revenue of approximately $3,747,000 and
$2,003,000 as of December 31, 1998 and 1999, respectively,
attributable to the sales of licenses of Costpoint, and
Electronic Timesheet software. The revenues related to Costpoint
will be recognized upon the expiration of the refund period and
right of return, generally 60 to 90 days from the date of
delivery, and the fulfillment of any significant vendor
obligations. Also included in deferred revenue are ongoing
software support and consulting and training services.

7.  Commitments and Contingencies:

Office Space Lease

The Company leases office space under noncancellable operating
leases. Minimum rental expense is recognized on a straight-line
basis over the term of the lease, regardless of when payments are
 due. Rent expense was approximately $2,389,000 and $2,909,000
for the years ended December 31, 1998 and 1999,
respectively. The Companys primary lease expires in March
2002.

F-13



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of December 31, 1999, the future minimum operating lease
payments are as follows:

|            |  |                |       | 
|----------- |  | -------------- | ----- | 
|Year Ending |  |               
|December 31 |  | Amount        
|            |  |               
|            |  | (In Thousands)
|           
|           
|           
|           
|2000        |  | $              | 3,411 | 
|           
|           
|           
|           
|2001        |  |                | 3,376 | 
|           
|           
|           
|           
|2002        |  |                | 1,803 | 
|           
|           
|           
|           
|2003        |  |                | 1,068 | 
|           
|           
|           
|           
|Thereafter  |  |                |      | 
|            |  |                |       | 
|            |  | $              | 9,658 | 
|            |  |                |       | 

Profit-Sharing Plan

The Company has a 401(k) profit-sharing plan covering all
eligible employees. Employees are eligible to participate in the
plan after they have completed six months of service. Once the
eligibility requirement is satisfied, employees may become
participants on the earlier of the first day of the plan year or
the first day of the seventh month of the plan year coinciding
with the employees eligibility. Company contributions vest
ratably over five years. The Board of Directors approved a
contribution of 4 percent of eligible compensation for both
1998 and 1999. The Companys accrued contribution for 1998
and 1999 was approximately $936,000 and $1,210,785, respectively.

Other Matters

The Companys continuing operations are involved in various
claims incidental to its business. The Company is contesting
these matters and in the opinion of management, the ultimate
resolution of the legal proceedings will not have a material
adverse effect on the financial condition or the future operating
 results of the Company.

8.  Preferred Stock:

The Companys Board of Directors has the authority, without
further action by the shareholders, to issue preferred stock in
one or more series and to fix the terms and rights of the
preferred stock. Such actions by the Board of Directors could
adversely affect the voting power and other rights of the holders
 of common stock. Preferred stock could thus be issued quickly
with terms that could delay or prevent a change in control of the
 Company or make removal of management more difficult.

9.  Employee Stock Option Plans:

1987 Employee Stock Option Plan

Prior to April 1, 1996, the Companys sole stock option
 plan was the 1987 Employee Stock Option Plan (the 1987
Plan), a nonqualified plan. No further options can be
issued under the 1987 Plan. Options are exercisable over ten
years, subject to a five-year vesting period. Options granted
pursuant to the 1987 Value Plan are generally nontransferable.

At December 31, 1999, 111,950 options were outstanding and
111,050 options were exercisable under the 1987 Plan at exercise
prices ranging from $.249 to $.517 per share.

Employee Time Accelerated Stock Option Plan

On April 1, 1996, the Company created the Employee Time
Accelerated Stock Option Plan (the Accelerated Plan),
 under which 1,500,000 shares of common stock were reserved for
issuance, and granted

F-14



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

options thereunder to purchase 679,500 shares at an exercise
price of $4.00 per share, the appraised value of the common stock
 on the date of grant. Originally these options vested 100
percent on January 1, 2004. However, upon the initial public
 offering of the Companys common stock, these options began
 vesting ratably over a five-year period from the date of grant.
In December 1996, the Board of Directors reduced the number
of shares of common stock reserved for issuance under the
Accelerated Plan to equal the number of shares issuable upon the
exercise of options outstanding at December 10, 1996. At
December 31, 1999, 330,950 options were outstanding and
151,550 options were exercisable under the Accelerated Plan.

1996 Stock Option Plan

The Companys Board of Directors and the shareholders of the
 Company adopted a new 1996 Stock Option Plan (the 1996
Option Plan) in December 1996. A total of 2,100,000 shares
of common stock have been reserved for issuance under the 1996
Option Plan. No options were granted under the 1996 Option Plan
during the 1996 fiscal year. At December 31, 1999, 997,001
options were outstanding and 200,060 options were exercisable at
exercise prices ranging from $8.00 to $18.687 per share. The 1996
 Option Plan provides for grants of incentive stock options to
employees (including officers and employee directors) and for
grants of nonstatutory options to employees, nonemployee
directors and consultants.

The exercise price of incentive stock options granted under the
1996 Option Plan must not be less than the fair market value of
the common stock on the date of the grant, and the exercise price
 of nonstatutory options must not be less than 85 percent of
 the fair market value of the common stock on the date of the
grant. With respect to any optionee who owns stock representing
more than 10 percent of the voting power of all classes of
the Companys outstanding common stock, the exercise price
of any incentive stock option must be equal to at least 110
percent of the fair market value of the common stock on the date
of the grant, and the term of the option must not exceed five
years. The terms of all other options may not exceed
10 years.

1996 Employee Stock Purchase Plan

The Companys 1996 Employee Stock Purchase Plan (the
Purchase Plan) was adopted by the Companys
Board of Directors and approved by the shareholders of the
Company in December 1996. A total of 400,000 shares of common
stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions at a price equal to
85 percent of the lower of fair market value of the common
stock on the first day of the offering period or the last day of
the offering period. Since the Purchase Plans inception in
1997, 118,018 shares of common stock have been issued.

F-15



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Summary Activity

The following table summarizes the activity of all the
Companys stock option plans:

|                                       |                   |           |           |                 |   |   |                |                | 
|-------------------------------------- | ----------------- | --------- | --------- | --------------- | - | - | -------------- | -------------- | 
|                                       |                   | Number of |           |                
|                                       |                   | Shares    |           | Price Per Share
|                                       |                   |           |           |                
|Shares under option, December 31, 1996 |                   |           | 1,063,000 |                 |   | $ | 0.249   4.000 |               
|                                      
|                                      
|                                      
|                                      
|                                       | Options granted   |           |           | 347,000         |   |   |                | 8.00  22.500  | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options canceled  |           |           | (74,800         | ) |   |                | 0.392  11.000 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options exercised |           |           | (202,716        | ) |   |                | 0.304   4.000 | 
|                                       |                   |           |           |                 |   |   |                |               
|Shares under option, December 31, 1997 |                   |           | 1,132,484 |                 |   |   | 0.249  22.500 |               
|                                      
|                                      
|                                      
|                                      
|                                       | Options granted   |           |           | 623,108         |   |   |                | 3.191  24.500 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options canceled  |           |           | (116,501        | ) |   |                | 0.517  24.500 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options exercised |           |           | (160,261        | ) |   |                | 0.304  18.750 | 
|                                       |                   |           |           |                 |   |   |                |               
|Shares under option, December 31, 1998 |                   |           | 1,478,830 |                 |   |   | 0.249  18.687 |               
|                                      
|                                      
|                                      
|                                      
|                                       | Options granted   |           |           | 283,610         |   |   |                | 8.750  18.000 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options canceled  |           |           | (187,859        | ) |   |                | 8.500  18.750 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Options exercised |           |           | (134,680        | ) |   |                | 0.304  11.000 | 
|                                       |                   |           |           |                 |   |   |                |               
|Shares under option, December 31, 1999 |                   |           | 1,439,901 |                 |   |   | 0.249  18.687 |               
|                                       |                   |           |           |                 |   |   |                |               

On December 11, 1998, the Company repriced 383,050 options,
which had exercise prices between $18.75 and $24.50 per share to
the then current market price of $18.687 per share. This was
Companys first repricing of options and did not benefit
executive officers, affiliates, or major shareholders.

The Company adopted the disclosure requirements of SFAS
No. 123, Accounting for Stock-Based
Compensation, effective for the Companys
December 31, 1996 financial statements. The Company applies
APB Opinion No. 25 and related Interpretations in accounting
 for its plans. Accordingly, compensation cost has been
recognized for its stock plans based on the intrinsic value of
the stock option at date of grant (i.e. the difference between
the exercise price and the fair value of the Companys
stock).

Had compensation cost for the Companys stock-based
compensation plans been determined based on the fair value at the
 grant dates for awards under those plans consistent with the
method of FASB Statement 123, the Companys net income
and earnings per share would have been reduced to the pro forma
amounts indicated below:

|                                        |  |                                       |        |      |  |      |        |  |  |   |        | 
|--------------------------------------- |  | ------------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                        |  | 1997                                  |        | 1998 |  | 1999
|                                        |  |                                       |        |      |  |     
|                                        |  |                                      
|                                        |  | (In Thousands, except per share data)
|                                       
|                                       
|                                       
|                                       
|Net income before taxes, as reported    |  | $                                     | 17,607 |      |  | $    | 19,543 |  |  | $ | 28,093 | 
|                                       
|                                       
|                                       
|                                       
|Pro forma income tax provision          |  |                                       | 6,777  |      |  |      | 8,585  |  |  |   | 9,873  | 
|                                       
|                                       
|                                       
|                                       
|Pro forma compensation expense          |  |                                       | 896    |      |  |      | 1,317  |  |  |   | 2,589  | 
|                                        |  |                                       |        |      |  |      |        |  |  |   |        | 
|Pro forma net income                    |  | $                                     | 9,934  |      |  | $    | 9,641  |  |  | $ | 15,631 | 
|                                        |  |                                       |        |      |  |      |        |  |  |   |        | 
|Diluted earnings per share, as reported |  | $                                     | 0.61   |      |  | $    | 0.64   |  |  | $ | 0.97   | 
|                                       
|                                       
|                                       
|                                       
|Diluted earnings per share, pro forma   |  | $                                     | 0.56   |      |  | $    | 0.53   |  |  | $ | 0.88   | 

The fair value of each option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions used for grants in 1997, 1998, and 1999,
respectively; no dividend yield, expected volatility of 70, 60,
and 70 percent, risk-free interest rates of approximately
5.9, 4.6, and 6.5 percent, respectively, and expected lives
of seven years. The volatility was based on the volatility
percentage of Deltek and comparable publicly traded companies
since the Company does not have a sufficient history of stock
transactions. Income taxes represent the assumed effective rate
which the Company would pay if it had

F-16



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##### Table of Contents



DELTEK SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

terminated its election as an S Corporation as of
January 1, 1997, net of any tax benefit for the incremental
increase in pro forma compensation expense.

10.  Segment Reporting

The Company operates in one industry segment; the design,
development, marketing and support of project accounting
enterprise resource planning applications software products. The
majority of the Companys revenues are derived in the United
 States.

11.  Quarterly Financial Data (unaudited):

The following unaudited quarterly data has been prepared from the
 financial records of the Company without audit, and reflects all
 adjustments which, in the opinion of management, were of a
normal recurring nature and necessary for a fair presentation of
the results of operations for the interim periods presented (in
thousands, except per share data).

|                                          |  |           |        |          |  |               |        |              |  |   |        |  |  |   |        | 
|----------------------------------------- |  | --------- | ------ | -------- |  | ------------- | ------ | ------------ |  | - | ------ |  |  | - | ------ | 
|                                          |  | March 31, |        | June 30, |  | September 30, |        | December 31,
|                                          |  | 1998      |        | 1998     |  | 1998          |        | 1998        
|                                          |  |           |        |          |  |               |        |             
|Net sales                                 |  | $         | 17,753 |          |  | $             | 19,949 |              |  | $ | 21,604 |  |  | $ | 23,763 | 
|                                         
|                                         
|                                         
|                                         
|Gross profit                              |  |           | 11,487 |          |  |               | 12,696 |              |  |   | 13,609 |  |  |   | 14,877 | 
|                                         
|                                         
|                                         
|                                         
|Net income                                |  |           | 3,106  |          |  |               | 776    | (1)          |  |   | 3,716  |  |  |   | 4,157  | 
|                                         
|                                         
|                                         
|                                         
|Basic net income per common share         |  | $         | 0.18   |          |  | $             | 0.04   |              |  | $ | 0.21   |  |  | $ | 0.23   | 
|                                         
|                                         
|                                         
|                                         
|Fully diluted net income per common share |  | $         | 0.17   |          |  | $             | 0.04   |              |  | $ | 0.20   |  |  | $ | 0.23   | 

|                                    |  |           |        |          |  |               |        |              |  |   |        |  |  |   |        | 
|----------------------------------- |  | --------- | ------ | -------- |  | ------------- | ------ | ------------ |  | - | ------ |  |  | - | ------ | 
|                                    |  | March 31, |        | June 30, |  | September 30, |        | December 31,
|                                    |  | 1999      |        | 1999     |  | 1999          |        | 1999        
|                                    |  |           |        |          |  |               |        |             
|Net sales                           |  | $         | 23,507 |          |  | $             | 23,836 |              |  | $ | 25,139 |  |  | $ | 25,762 | 
|                                   
|                                   
|                                   
|                                   
|Gross profit                        |  |           | 14,838 |          |  |               | 15,588 |              |  |   | 15,484 |  |  |   | 16,262 | 
|                                   
|                                   
|                                   
|                                   
|Net income                          |  |           | 4,041  |          |  |               | 4,367  |              |  |   | 4,304  |  |  |   | 4,500  | 
|                                   
|                                   
|                                   
|                                   
|Basic net income per common share   |  | $         | 0.23   |          |  | $             | 0.25   |              |  | $ | 0.25   |  |  | $ | 0.27   | 
|                                   
|                                   
|                                   
|                                   
|Diluted net income per common share |  | $         | 0.22   |          |  | $             | 0.25   |              |  | $ | 0.25   |  |  | $ | 0.26   | 




|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reflects pretax non-recurring expenses of $2,500 for purchased
	in-process research and development and $1,096 for acquisition
	costs associated with a pooling-of-interests.

F-17



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Deltek Systems, Inc.:

We have audited in accordance with auditing standards generally
accepted in the United States the financial statements of Deltek
Systems, Inc. included in this Form 10-K and have issued our
 report thereon dated February 2, 2000. Our audit was made
for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule I, Valuation and
Qualifying Accounts, is the responsibility of the Companys
management and is presented for the purpose of complying with the
 Securities and Exchange Commissions rules and is not a
part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the
 basic financial statements and, in our opinion, fairly states,
in all material respects, the financial data required to be set
forth therein in relation to the basic financial statements taken
 as a whole.

/s/ Arthur Andersen LLP

Vienna, Virginia



F-18



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##### Table of Contents



Schedule II

DELTEK SYSTEMS, INC.

VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 1997, 1998, and 1999


|                   |                   |           |   |             |  |            |   |         |   |  |   |       |  |  |   |       | 
|------------------ | ----------------- | --------- | - | ----------- |  | ---------- | - | ------- | - |  | - | ----- |  |  | - | ----- | 
|                   |                   | Beginning |   | Amounts     |  | Charged    |   | Ending 
|                   |                   | Balance   |   | Written-Off |  | to Expense |   | Balance
|                   |                   |           |   |             |  |            |   |        
|December 31, 1997: |                   |           |   |             |  |            |   |         |   |  |   |       |  |  |   |      
|                  
|                  
|                  
|                  
|                   | Bad-debt reserves |           | $ | 466         |  |            | $ | (174    | ) |  | $ | 281   |  |  | $ | 573   | 
|                  
|                  
|                  
|                  
|December 31, 1998: |                   |           |   |             |  |            |   |         |   |  |   |       |  |  |   |      
|                  
|                  
|                  
|                  
|                   | Bad-debt reserves |           |   | 573         |  |            |   | (69     | ) |  |   | 185   |  |  |   | 689   | 
|                  
|                  
|                  
|                  
|December 31, 1999: |                   |           |   |             |  |            |   |         |   |  |   |       |  |  |   |      
|                  
|                  
|                  
|                  
|                   | Bad-debt reserves |           |   | 689         |  |            |   | (2,900  | ) |  |   | 3,615 |  |  |   | 1,404 | 

F-19